Management Information Systems: An Overview

SYSTEMS, DATA, AND INFORMATION A system is:  A set of interrelated components  That interact  To achieve a goal

SYSTEMS, DATA, AND INFORMATION Most systems are composed of smaller subsystems and vice versa!

SYSTEMS, DATA, AND INFORMATION Every organization has goals.  The subsystems should be designed to maximize achievement of the organization’s goals.  Even to the detriment of the subsystem itself.  EXAMPLE: The production department (a subsystem) of a company might have to forego its goal of staying within its budget in order to meet the organization’s goal of delivering product on time.

SYSTEMS, DATA, AND INFORMATION Goal conflict occurs when the activity of a subsystem is not consistent with another subsystem or with the larger system. Goal congruence occurs when the subsystem’s goals are in line with the organization’s goals. The larger and more complicated a system, the more difficult it is to achieve goal congruence.

Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory. Figure 1-3 Data and Information

SYSTEMS, DATA, AND INFORMATION The systems concept encourages integration (i.e., minimizing the duplication of recording, storing, reporting, and processing). Data are facts that are collected, recorded, stored, and processed by an information system. Organizations collect data about:  Events that occur  Resources that are affected by those events  Agents who participate in the events

SYSTEMS, DATA, AND INFORMATION Information is different from data. Information is data that have been organized and processed to provide meaning to a user. Usually, more information and better information translates into better decisions.

SYSTEMS, DATA, AND INFORMATION However, when you get more information than you can effectively assimilate, you suffer from information overload.  Example: Final exams week! When you’ve reached the overload point, the quality of decisions declines while the costs of producing the information increases.

SYSTEMS, DATA, AND INFORMATION Benefits of information - Cost of producing information Value of information Benefits of information may include: Reduction of uncertainty Improved decisions Improved ability to plan and schedule activities

SYSTEMS, DATA, AND INFORMATION Benefits of information - Cost of producing information Value of information Costs may include time and resources spent: Collecting data Processing data Storing data Distributing information to users

SYSTEMS, DATA, AND INFORMATION Benefits of information - Cost of producing information Value of information Costs and benefits of information are often difficult to quantify, but you need to try when you’re making decisions about whether to provide information.

SYSTEMS, DATA, AND INFORMATION Characteristics that make information useful:  Relevance It reduces uncertainty by helping you predict what will happen or confirm what already has happened.

SYSTEMS, DATA, AND INFORMATION Characteristics that make information useful:  Relevance  Reliability It’s dependable, i.e., free from error or bias and faithfully portrays events and activities.

SYSTEMS, DATA, AND INFORMATION Characteristics that make information useful:  Relevance  Reliability  Completeness It doesn’t leave out anything that’s important.

SYSTEMS, DATA, AND INFORMATION Characteristics that make information useful:  Relevance  Reliability  Completeness  Timeliness You get it in time to make your decision.

SYSTEMS, DATA, AND INFORMATION Characteristics that make information useful:  Relevance  Reliability  Completeness  Timeliness  Understandability It’s presented in a manner you can comprehend and use.

SYSTEMS, DATA, AND INFORMATION Characteristics that make information useful:  Relevance  Reliability  Completeness  Timeliness  Understandability  Verifiability A consensus notion—the nature of the information is such that different people would tend to produce the same result.

SYSTEMS, DATA, AND INFORMATION Characteristics that make information useful:  Relevance  Reliability  Completeness  Timeliness  Understandability  Verifiability  Accessibility You can get to it when you need it and in a format you can use.

Information is provided to both:  External users  Internal users SYSTEMS, DATA, AND INFORMATION

External users primarily use information that is either:  MANDATORY INFORMATION—required by a governmental entity, such as Form 10-K required by the SEC; or  ESSENTIAL INFORMATION—required to conduct business with external parties, such as purchase orders. SYSTEMS, DATA, AND INFORMATION

In providing mandatory or essential information, the focus should be on:  Minimizing costs.  Meeting regulatory requirements.  Meeting minimum standards of reliability and usefulness. SYSTEMS, DATA, AND INFORMATION

Internal users primarily use discretionary information. The primary focus in producing this information is ensuring that benefits exceed costs, i.e., the information has positive value. SYSTEMS, DATA, AND INFORMATION

The Interdependence Between Organizations and Information Technology There is a growing interdependence between a firm’s information systems and its business capabilities. Changes in strategy, rules, and business processes increasingly require changes in hardware, software, databases, and telecommunications. Often, what the organization would like to do depends on what its systems will permit it to do. Figure 1-2

Dimensions of information systems  Organizations  Management  Technology Perspectives on Information Systems

Using information systems effectively requires an understanding of the organization, management, and information technology shaping the systems. An information system creates value for the firm as an organizational and management solution to challenges posed by the environment. Figure 1-5 Information Systems Are More Than Computers

The Order Fulfillment Process Figure 2-1 Fulfilling a customer order involves a complex set of steps that requires the close coordination of the sales, accounting, and manufacturing functions. Business Processes and Information Systems

Systems from a functional perspective  Sales and marketing systems  Manufacturing and production systems  Finance and accounting systems  Human resources systems Systems from a constituency perspective  Transaction processing systems  Management information systems and decision-support systems  Executive support systems Relationship of systems to one another Types of Business Information Systems

Interrelationships Among Systems Figure 2-10 The various types of systems in the organization have interdependencies. TPS are major producers of information that is required by many other systems in the firm, which, in turn, produce information for other systems. These different types of systems are loosely coupled in most business firms, but increasingly firms are using new technologies to integrate information that resides in many different systems.

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