Information System and Its Types | System Analysis and Design (SAD)

What is an Information System?

In the simplest sense, a system that provides information to people in an organization is called an information system (IS).

Information systems in organizations capture and manage data to produce useful information that supports an organization and its employees, customers, suppliers, and partners. So, many organizations consider information systems to be an essential one.

Information systems produce information by using data about significant people, places, and things from within the organization and/or from the external environment to make decisions, control operations, analyze problems, and create new products or services. Information is the data shaped into a meaningful form. Data, on the other hand, are the collection of raw facts representing events occurring in organizations or the environment before they have been organized and arranged into a form that people can understand and use.

The three activities to produce information in an information system are input, processing, and output. Input captures or collects raw data from within the organization or from its external environment for processing. Processing converts these raw data into meaningful information. Output transfers this information to the people who will use it or to the activities for which it will be used. Information systems also require feedback, which is used to monitor the current information system output and compare it to the system goal.

The two types of information systems are formal and informal. Formal information systems are based on accepted and fixed definitions of data and procedures for collecting, storing, processing, disseminating, and using these data with predefined rules. Informal information systems, in contrast, rely on unstated rules.

Formal information systems can be manual as well as computer-based. Manual information systems use paper-and-pencil technology. In contrast, computer-based information systems (CBIS) rely on computer hardware and software for processing and disseminating information.

Types of Information Systems

In practice, there are several classes of information systems in organizations. Each class serves the needs of different types of users. These are transaction processing system (TPS), management information system (MIS), decision support system (DSS), executive information system (EIS), expert system, communication and collaboration system, and office automation system.

Transaction Processing Systems (TPSs)

These are the computerized systems that perform and record the daily routine transactions necessary to conduct business. These systems serve the operational level of the organization. Some examples include sales order entry, hotel reservation systems, payroll, employee record keeping, and shipping.

Transaction processing systems are central to a business. TPS failure for a few hours can cause a firm’s demise and perhaps other firms linked to it. Managers need TPS to monitor the status of internal operations and the firm’s relations with the external environment. TPS are also major producers of information for the other types of systems.

Online transaction processing systems (OLTP) is an interactive data processing system that involves a direct connection between TPS programs and users. As soon as a single transaction is entered into a computer system, the program interacts immediately with the user for that transaction. It is often known as the live system where there is no time lag between data creation and its processing. A good example of this system is the online ticket reservation system.

Management Information Systems (MISs)

These are the information systems at the management level of an organization and serve management-level functions like planning, controlling, and decision-making. These systems provide reports that are usually generated on a predetermined schedule and appear in prearranged format. Typically, these systems use internal data provided by the transaction processing systems. These systems are used for structured decision-making and in some cases for semi-structured decision-making as well. Salary analysis and sales reporting are examples in which MIS can be used.

Decision Support Systems (DSS)

These systems also serve at the management level of the organization. These systems combine data and sophisticated analytical models or data analysis tools to support semi-structured and unstructured decision-making. These systems use internal information from TPS and MIS, and often information from external sources, such as current stock prices or product prices of competitors. DSS has more analytical power than other systems. Contract cost analysis is an example in which DSS can be used.

Executive Information Systems (EISs)

These systems are also called executive support systems (ESSs) and serve the strategic level of the organization. These systems are designed to address unstructured decision-making through advanced graphics and communication. These systems incorporate data about external events such as new tax laws or competitors, but they also draw summarized information from internal MIS and DSS.

These systems are not designed to solve a specific problem but they provide a generalized computing and telecommunication capacity that can be applied to a changing array of problems. The 5-year operating plan is an example in which EIS can be used.

Expert Systems

An expert system is an extension of DSS that captures and reproduces the knowledge and expertise of an expert problem solver or decision-maker and then simulates the “thinking” or “actions” of that expert. These systems imitate the logic and reasoning of the experts within their respective fields.

Expert systems are implemented with artificial intelligence (AI) technology that captures, stores, and provides access to the reasoning of the experts.

Communication and Collaboration Systems

These systems enable more effective communications between workers, partners, customers, and suppliers to enhance their ability to collaborate. These systems use network technology that allows companies to coordinate with other organizations across great distances. These systems create new efficiencies and new relationships between an organization, its customers and suppliers, and business partners redefining organizational boundaries.

Office Automation Systems

Office automation (OA) is more than word processing and spreadsheet applications. Office automation systems support a wide range of business office activities for improved workflow and communication between workers, regardless of whether or not those workers are located in the same office.

Office automation functions include word processing, spreadsheet applications, e-mails, workgroup computing, fax processing, workflow management, etc.

Office automation systems can be designed to support both individuals and work groups. Personnel information systems are those designed to meet the needs of a single user. They are designed to boost an individual’s productivity. Workgroup information systems, on the other hand, are designed to meet the needs of a workgroup. They are designed to boost the group’s productivity.