Lecture 3

The Role of IS in Business To be covered The Role of IS in Business The important attributes of information quality. What are the types of Information System (IS) within an organization. Levels of organization. The role of each types of IS in organization.

Do you think using IS in Business important? Why?

The Role of IS in Business Businesses make use of information systems so that accurate and up-to-date information will be available when it is required. Since it is not always possible to predict what information will be needed at some future date, most organizations use computers to record and store the details of all their business transactions. When a query arises, or a standard business report must be produced, this raw data can be retrieved and manipulated to produce the required information. For example : a customer may enquire whether an item is in stock, or financial statements must be produced for shareholders.

What characteristics of information products make them valuable and useful to Business?

information quality Information that is outdated, inaccurate, or hard to understand is not very meaningful, useful, or valuable to you or other business professionals. People need information of high quality. It is useful to think of information as having the three dimensions of time, content, and form.

information quality

So what kind of IS do we need?

There are a number of different application programs are used within a single business or organizations . For example, the methods and calculations used in processing the employee payroll are very different from those used for managing stock control or for preparing a balance sheet. Therefore , there are different types (Classification ) of IS applications that are used within a business and an organization.

Classification of Information Systems Information systems generally are classified into five categories:  Office information systems (OIS), Transaction processing systems (TPS), Management information systems (MIS), Decision support systems (DSS), Expert systems( ES).   The following sections present each of these information systems

1- Office information systems (OIS) An office information system, or OIS , is an information system that uses hardware, software and networks to enhance work flow and facilitate communications among employees.   Also described as office automation; employees perform tasks electronically using computers and other electronic devices, instead of manually.   With an office information system, for example, a registration department might post the class schedule on the Internet and e-mail students when the schedule is updated.  In a manual system, the registration department would photocopy the schedule and mail it to each student’s house.

1- Office information systems (OIS) An office information system supports a range of business office activities such as creating and distributing graphics and/or documents, sending messages, scheduling, and accounting.   All levels of users from executive management to non-management employees utilize and benefit from the features of an OIS. The software in OIS are used to support these activities include Word processing, Spreadsheets, Databases, presentation graphics, E-mail, Web browsers, Web page authoring, personal information management,.

2-Transaction Processing Systems (TPS) A transaction processing system (TPS) is an information system that captures and processes data generated during an organization’s day-to- day transactions.  A transaction is a business activity such as a deposit, payment, order ,reservation , invoicing ,issuing of stock , booking airline tickets, purchasing goods or services. Support simple processing of large amount of structured data

2-Transaction Processing Systems A Payroll Transaction Processing System (Example) Principles of Information Systems, Eighth Edition

Payroll system example

2-Transaction Processing Systems (TPS) Clerical staff typically perform the activities associated with transaction processing, which include the following: Recording a business activity such as a student’s registration, a customer’s order, an employee’s timecard or a client’s payment. Confirming an action or triggering a response, such as printing a student’s schedule, sending a thank- you note to a customer, generating an employee’s paycheck or issuing a receipt to a client. Maintaining data, which involves adding new data, changing existing data, or removing unwanted data.

2-Transaction Processing Systems (TPS) More examples of TPS

Architecture of a transaction processing system using the basic systems model

2-Transaction Processing Systems (TPS) As computers became more powerful, system developers built online transaction processing systems.  With online transaction processing (OLTP) the computer processes transactions as they are entered.   For example ,when you register for classes, your school probably uses OLTP.  The registration administrative assistant  enters your desired schedule and the computer immediately prints your statement of classes.

3- Management Information Systems (MIS) A management information system, is an information system that generates accurate, timely and organized information so managers can make decisions, solve problems, supervise activities, and track progress.   Or, it is a System that use the data generated by the TPS to help lower and middle managers in their decision making.

3-Management Information Systems (MIS) For example :To process a sales order, the transaction processing system records the sale, updates the customer’s account balance, and makes a deduction from inventory.  Using this information, the related management information system can produce reports that recap daily sales activities; list customers with past due account balances; graph slow or fast selling products; and highlight inventory items that need reordering.

More example: where TPS data are used for MIS applications Because it generates reports on a regular basis, a management information system sometimes is called a management reporting system (MRS).

3-Management Information Systems (MIS) Management information systems provide a variety of information products to managers. Four major reporting alternatives Periodic Scheduled Reports. This traditional form of providing information to managers uses a prespecified format designed to provide managers with information on a regular basis. Typical examples of such periodic scheduled reports are daily or weekly sales analysis reports and monthly financial statements.

3- Management Information Systems (MIS) Exception Reports. In some cases, reports are produced only when exceptional conditions occur. In other cases, reports are produced periodically but contain information only about these exceptional conditions. For example, a credit manager Can be provided with a report that contains only information on customers who have exceeded their credit limits. Exception reporting reduces information Overload Instead of overwhelming decision makers with periodic detailed reports of business activity.

3- Management Information Systems (MIS) Demand Reports and Responses. Information is available whenever a manager demands it. For example, Web browsers, DBMS query languages, and report generators enable managers at PC workstations to get immediate responses or to find and obtain customized reports as a result of their requests for the information they need. Thus, managers do not have to wait for periodic reports to arrive as scheduled

3- Management Information Systems (MIS) Push Reporting. Information is pushed to a manager’s networked workstation. Thus, many companies are using webcasting software to broadcast selectively reports and other information to the networked PCs of managers and specialists over their corporate intranets

4- Decision Support System(DSS) A decision support system (DSS) is an information system ( interactive computer-based systems and subsystems ) designed to help higher managers to reach a decision when a decision- making situation arises For example: A sales manager might need to determine how high to set yearly sales quotas based on increased sales and lowered product costs. Decision support systems help provide information to support such decisions.

4- Decision Support System(DSS) A decision support system uses data from internal and/or external sources. Internal sources of data might include for example sales, manufacturing, inventory, or financial data from an organization’s database.   External sources could include for example interest rates, population trends, and costs of new housing construction or raw material pricing.   Users of a DSS, often managers, can manipulate the data used in the DSS to help with decisions.

Types of DSS Communication-driven DSS Data-driven DSS Document-driven DSS  Knowledge-driven DSS Model-driven DSS 

Types of DSS : Communication-driven DSS Most communications-driven DSSs are targeted at internal teams, including partners. Its purpose are to help conduct a meeting, or for users to collaborate. The most common technology used to deploy the DSS is a web or client server. Examples: chats and instant messaging software, online collaboration and net-meeting systems.

Types of DSS : Data-driven DSS Most data-driven DSSs are targeted at managers, staff and also product/service suppliers. It is used to query a database or data warehouse to seek specific answers for specific purposes. It is deployed via a main frame system, client/server link, or via the web. Examples: computer-based databases that have a query system to check (including the incorporation of data to add value to existing databases.

Types of DSS : Document-driven DSS Document-driven DSSs are more common, targeted at a broad base of user groups. The purpose of such a DSS is to search web pages and find documents on a specific set of keywords or search terms. The usual technology used to set up such DSSs are via the web or a client/server system.

Types of DSS : Knowledge-driven DSS Knowledge-driven DSSs or 'knowledgebase' as they are known, are a catch-all category covering a broad range of systems covering users within the organization setting it up, but may also include others interacting with the organization - for example, consumers of a business. It is essentially used to provide management advice or to choose products/services. The typical deployment technology used to set up such systems could be silent/server systems, the web, or software running on stand-alone PCs.

Types of DSS : Model-driven DSS Model-driven DSSs are complex systems that help analyze decisions or choose between different options. These are used by managers and staff members of a business, or people who interact with the organization, for a number of purposes depending on how the model is set up - scheduling, decision analyses etc. These DSSs can be deployed via software/hardware in stand-alone PCs, client/server systems, or the web.

4- Decision Support System(DSS)’s Components 1. Data Management Subsystem 2. Model Management Subsystem 3. Knowledge Management Subsystem 4. User Interface Subsystem 5. The User

4- Decision Support System(DSS)’s Components Data Management Model Management Other Systems Knowledge Management User Interface User DSS Architecture

4.1 The Data Management Subsystem The Data Management Subsystem Data Management subsystem includes a database that contains relevant data for the situation and managed by software called the Database Management System (DBMS) and can be interconnected with the corporate data warehouse. Usually, the data are stored or accessed via a database Web server. The Capabilities of DBMS in a DSS Captures/extracts data for inclusion in a DSS database Updates (adds, deletes, edits, changes) data records and files Interrelates data from different sources Retrieves data from the database for queries and reports Provides comprehensive data security (protection from unauthorized access, recovery capabilities, etc.) Performs complex data manipulation tasks based on queries Tracks data use within the DSS Manages data through a data dictionary

4.2 The Model Management Subsystem Model Management Subsystem is a software package that includes financial, statistical, management science or other quantitative models that provide the system’s analytical capabilities and appropriate software management. There can be 3 different types of modeling software for DSSs: Statistical models, Optimization models, Forecasting models.

4.2 The Model Management Subsystem : statistical models Statistical modeling software can be used to help establish relationships such as relating product sales to differences in age, income or other factors between communities. Ex: SPSS.

4.2 The Model Management Subsystem : optimization models Optimization models often using Linear Programming (LP) determine the proper mix of products within a given market to maximize profit.

4.2 The Model Management Subsystem : Forecasting models. The user of this type of model might supply a range of historical data to project future conditions and sales that might result from those conditions. Companies often use this software to predict the action of competitors.

4.2.1 Major Functions (Capabilities) of the MBMS Creates models easily and quickly, either from scratch or from existing models or from the building blocks. Allows users to manipulate the models so they can conduct experiments and sensitivity analyses ranging from “what-if” to goal seeking. Stores, retrieves, and manages a wide variety of different types of models in a logical and integrated manner. Accesses and integrates the model building blocks. Catalogs and displays the directory of models for use by several individuals in the organization. Interrelates models with appropriate linkages with the database and integrates them within the DSS. Manages and maintains the model base with management functions analogous to database management: store, access, run, update, link, catalog, and query. Uses multiple models to support problem solving.

4.3The Knowledge Management Subsystem Provides expertise in solving complex unstructured and semi-structured problems What models to use, how, interpreting results Reasoning, handling uncertainty, learning from data Expertise provided by an expert system or other intelligent system (AI techniques) Leads to intelligent DSS Example: Data mining

4.4The User Interface (Dialog) Subsystem Includes all communication between a user and the DSS To most users, the user interface is the system Major Capabilities will include : Provides graphical user interface. Accommodates the user with a variety of input devices. Presents data with a variety of formats and output devices. Gives users “help” capabilities, prompting, diagnostic and suggestion routines, or any other flexible support. Provides interactions with the database and the model base. Stores input and output data. Provides color graphics, three-dimensional graphics, and data plotting. Has windows to allow multiple functions to be displayed concurrently. Provides training by examples (guiding users through the input and modeling process). http://www.youtube.com/watch?v=0iAFIBtUlSQ

Tools used in a DSS Using a DSS involves different types of analytical modeling activities:

The DSS Hierarchy Suggestion systems Optimization systems Representational models Accounting models Analysis information systems Data analysis systems File drawer systems high Possible Complexity low

File Drawer Systems They are the simplest type of DSS Can provide access to simple items of information The values obtained are used straight forwardly to make a decision Example: ATM Machine Discover the account balance before deciding how much to withdraw

Data Analysis Systems Provide access to data Allow data manipulation capabilities Example: Airline Reservation system: No more seats available so provide alternative flights you can use the information to make flight plans

Analysis Information Systems Provide access to multiple data sources Combines data from different sources Allows data analysis capabilities Example: Compare growth in revenues to industry average (requires access to many sources)

Accounting Models Use internal accounting data Provide accounting modeling capabilities Can not handle uncertainty Example: Bill of material used in a dressmaking shop Calculate production costs Make pricing decisions

Representational Model Uses models to solve decision problems using forecasts Can be used to augment the capabilities of Accounting models Can incorporate uncertainty Example: Use demand data to forecast next year’s demand Use the results to make inventory decisions.

Optimization Systems Used to estimate the effects of different decision alternatives Based on optimization models Can incorporate uncertainty Example: Assign sales force to territory Provide the best assignment schedule

Suggestion Systems A prescriptive model (this is the way it is) may be used to suggest to the decision maker the best action may incorporate an Expert System Example: Bank customer applies for personal loan Use the system to recommend a decision

Examples of DSS American airlines: for pricing decisions and choosing air routes IBM: for determining routing for repair people Texas oil and gas: for evaluating potential drill sites National Gypsum: corporate planning and forecasting. http://www.youtube.com/watch?v=YhXF_rPHBOA

DSS in businesses As businesses become more aware of the power of decision support systems, they are using them in ever-increasing areas of the business.

Managers and Decision Making For each decision you make, the decision will fall into one of the following categories: Structured Decisions Unstructured Semi-Structured

1-STRUCTURED DECISIONS Often called “programmed decisions” because they are routine and there are usually specific policies, procedures, or actions that can be identified to help make the decision “This is how we usually solve this type of problem”

2-Unstructured Decisions Decision scenarios that often involve new or unique problems and the individual has little or no programmatic or routine procedure for addressing the problem or making a decision 3-Semi-structured Decisions Decision scenarios that have some structured components and some unstructured components.

5-Executive Information System(EIS) An expert system  is an information system that captures and stores the knowledge of human experts and then imitates human reasoning and decision- making processes for those who have less expertise. Examples of expert systems is seen in systems that have resolved diverse problems as diagnosing illnesses, searching for oil.  Expert systems are one part of an exciting branch of computer science called artificial intelligence.   Artificial intelligence (AI) is the application of human intelligence to computers.   AI technology can sense your actions and, based on logical assumptions and prior experience, will take the appropriate action to complete the task.  AI has a variety of capabilities, including speech recognition, logical reasoning, and creative responses.

5-Executive Information System(EIS) Expert systems are composed of two main components:  a knowledge base and inference rules.   A knowledge base is the combined subject knowledge and experiences of the human experts.   The inference rules are a set of logical judgments applied to the knowledge base each time a user describes a situation to the expert system.

Now, how can we used these IS types in an organization?

Different Levels of Organisation Within any single organization, executives at different levels in the management hierarchy have very different information requirements, and different types of information systems have evolved to meet their needs. A common approach to examining the types of information systems used within organizations, is to categories IS applications by the roles they play at various levels in the organizational structure. There are four levels: At the lowest level, non-management staff. Operational management. Tactical management . At the top of the pyramid, strategic management.

Levels of Organisation :lowest level The lowest level, non-management staff attend to routine daily business transactions. Type of IS used : Transaction processing system (TPS) Example: selling goods and issuing receipts for payment.

Scheduling employees , placing orders. 2. Operational Level Operational management are responsible for monitoring the transactions that are occurring, and dealing with any problems that may arise. Type of information system used :management information system. Day-to-day business processes Interactions with customers Information systems used to: Automate repetitive tasks Improve efficiency Decisions: Structured (What are structured decisions?) Recurring Examples of Operational Level Decisions? Scheduling employees , placing orders.

3. Managerial (Tactical) Level Tactical management decide on budgets, set targets, identify trends and develop short term plans for the business. Type of information system used :Decision support systems. Monitoring and controlling operational-level activities Providing information to executive level Midlevel managers Focus on effectively utilizing and deploying resources Goal of achieving strategic objectives Managers’ decisions Semistructured Moderately complex Examples of Managerial Level Decisions? New tools to cut costs or improve efficiency

4. Executive (strategic) Level At the top of the pyramid, strategic management is responsible for defining the long term goals of the company, and how it intends to position itself within its particular industry. Type of information system used : Executive information systems. The president, CEO, vice presidents, possibly board of directors. Decisions Long-term strategic issues Unstructured decisions Complex and non-routine problems Long-term ramifications Examples of executive level decisions? New products that change the industry 7-67

Different Levels of Organisation and types of support systems Strategic Management Tactical Management Operation Management Non- management staff EIS DSS MIS Executive information systems TPS

Summary Characteristics of each level of management support

How does IS support Business Objectives? Increasing the efficiency of business processes Cutting supply costs Improving levels of customer service Improving managerial decision- making http://www.youtube.com/watch?v=4ypCCSSu4jE

The Support that Different Types of IS Provide to Business Objectives Record routine transactions within the different departments of an organization; Draw from the TPS to monitor and control business performance; Assist managers with complex decision-making tasks; Make use of information technology to gain competitive advantage; TPS MIS DSS EIS

Thank you . Any questions?