What is an Information System?
An Information System collects, processes, stores, analyses, and disseminates information for a specific purpose. Like any other system, an information system includes inputs and outputs. It processes the inputs and produces outputs that are sent to the user or the other systems. A feedback mechanism that controls the operation may be included. Like any other system, an information system operates within an environment. In studying information systems, it is important to note the differences between data, information and knowledge.
Data is raw facts or elementary descriptions of things, events, activities, and transactions that are captured, recorded, stored, and classified, but not organised to convey any specific meaning. Examples of data would include grade averages, bank balances, or the number of hour’s employees worked in a period.
Information is a collection of facts (Data) organised in some manner so that they are meaningful to a recipient. For example, if we include student names with grade averages, customer names with the bank balances, and employee wages with hours worked, we could have useful information. In other terms, information comes from data that has been processed.
Knowledge consists of information that has been organised and processed to convey understanding, experiences, accumulate learning, or expertise as it applies to a current business problem or process. Information that is processed to extract critical implications and to reflect past experience and expertise provides the recipient with organisational knowledge, which has a high value. This value may prevent a manager from making the same mistakes another manager made, or save them reinventing the wheel!
What is a Computer Based Information System (CBIS)
A CBIS is an information system that uses computer and technology to perform its intended tasks. Information technology is a particular component of a system, e.g. a personal computer, printer or network. But few information technologies are used alone. Rather, they are most effective when combined into information systems.
The basic components of information systems are the following:
1. Hardware
2. Software
3. Database: an organised collection of related files or records that stores data and the associations among them.
4. Network: a connecting system that permits the sharing of resources among different computers.
5. Procedures: the strategies, policies, methods, and rules for using the information system.
6. People: the most important element in information systems; includes those persons who work with the information system or use its output.
All CBISs have a similar purpose: to provide a solution to a business problem. The successful application of a CBIS requires an understanding of the business and its environment, as well as an understanding of the business problem to which the CBIS is to be applied.
Example: to build a CBIS that supports an airline reservation system, it is necessary to understand how the airline operated; its schedules, routes, type of planes, fare structure, number and type of seats on each type of plane, and so on. CBISs also must determine what is admissible and possible within the culture of the people and groups involved.
CBISs come in a great variety. One way to categorise them is by the level in the organisation in which they are used. For example: at the lower levels of an organisation we find many Transaction processing systems (TPSs). As there name implies, TPSs handle the basic transactions of the firm. These systems are found in all functional areas of a company, and they not only process transactions but also collect data on each transaction.
At the middle (managerial) level of the firm, management information systems (MISs) are used by managers to analyse the data from the TPS, and other sources, to create reports and other types of information that can be used to support managerial decision making.
More specialised CBISs such Decision Support Systems and Executive Support Systems are used at higher levels in the organisation.
The information needs of an organisation
The modern organisation, in order to compete effectively in the modern business environment, expects their information systems to have many powerful capabilities. Information systems must be able to do the following:
1. Provide fast and accurate transaction processing
Every event that occurs in a business is called a transaction. Transactions include the sale of a unit of goods, a pay check issues, a bank deposit, a course grade registered, and so on. Clearly organisation can produce millions of transactions per day. Each transaction generates data. This data must be captured accurately and quickly. This process is called transaction processing, and information systems that capture, record, store and update this data are called Transaction Processing Systems (TPSs). A good example of a TPS is a Point of Sale (POS) computer technology linked to other computers that store the data. These POSs are the computerised cash registers and bar code readers that are found in the cast majority of modern retail stores, restaurants and other consumer businesses.
2. Provide Large-Capacity, fast-access storage
Information Systems must provide both enormous storage for corporate data, and also fast access to that data.
3. Provide fast communications (machine to machine, human to human)
Networks enable organisational employees and computers to communicate almost instantly around the world. High-transmission-capacity networks (those with high bandwidths) make fast communications possible. In addition, they allow data, voice, images, documents, and full motion video to be transmitted simultaneously. Networks also provide nearly instantaneous access to information for decision makers, thereby reducing information float.
4. Reduce Information overload
Information systems (particularly networks) have contributed to managers having too much information. For example, the amount of information available on the Internet doubles approximately every 100 days. As a result, managers cab feel drowned in information and unable to make decisions efficiently and effectively. Information systems can be designed to reduce this information overload. For example, Executive Information Systems (EISs) provide structured information that is tailored to each executive according to his or her critical success factors. Another example is software that prioritises managers’ emails, according to criteria, which they can set.
5. Span Boundaries
Information systems span boundaries inside organisations as well as between organisation along the entire supply chain. Inside the organisation, such boundary spanning facilitates decision making across functional areas, business process reengineering, and communications. Along the supply chain, boundary spanning facilitates shorter cycle times for product delivery, reduces inventory, and increases customer satisfaction.
6. Provide support for decision making
Decision support systems help decision makers across an organisation and at all levels of the organisation. Executive Information systems, for example, support executive decision-making. Interestingly, as information systems make information available to all employees, decision-making is often pushed down the organisation. Therefore, employees at lower organisational levels have the authority and responsibility to make more and larger decisions than ever before.
7. Provide a Competitive Weapon
In the past, information systems were viewed primarily as an expense. Today, information systems are being viewed as a profit center and are expected to give the organisation an advantage over its competitors. The classic examples of information systems being used for competitive advantage are the early airline reservation systems of the 1970’s. Today, information systems are being linked across entire supply chains to give competitive advantage to networked organisations. For example, Wal-Mart integrates its information systems with those of its suppliers to coordinate rapid inventory replenishment
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