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.
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