IT in Modern Organization

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R.K.Jena, IMT-Nagpur

Chapter Preview

In this chapter, we will discuss:

Foundation concepts of information systems in organizations. How information systems help organizations solve problems and seize opportunities. How information systems are managed in organizations.

Introduction

Data

Elementary description of things, events, activities, and transactions that are recorded, classified, and stored, but not organized to convey any specific meaning Data that has been organized so that they have meaning and value to the recipient Information that has been organized and processed to convey understanding, experience, and expertise as they apply to a current problem or activity

Information

Knowledge

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Information System : Concepts

and Definitions
An information system (IS) collects, processes, stores, analyzes, and disseminates information for a specific purpose Application.

Hardware Software Data Network Procedures People

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Information Infrastructure
Everything that supports information processing except information itself:

computer hardware general-purpose software networks and communication facilities database information management personnel Procedures

Defines integration, operation, documentation, maintenance, and management of computing resources. Defines how specific computing resources are arranged, operated, and managed

Information Architecture (IA)

IA is a general scheme of the information requirements in the organization (including information flows)

Centralized Information Architecture

Input transactions do not need to be processed in real time; On-line-data-entry personal can be centrally located; Large number of periodic outputs are produced by the system.

Decentralized (Distributed) Information Architecture

PC in a LAN or WAN Client/Server
Client/Server in a LAN Enterprisewide computing

Client/Server evolution into Internet-based architecture

Client/Server Architecture

Several computers share resources and are able to communicate with each other

A client - a computer attached to the network,

which is used to request and access shared network resources A server - a machine that is attached to the same network and provides clients with these services

Purpose : optimize the use of computer resources

Enterprisewide Architectures
Access to data, applications, services, and real-time flows of data in different LANs or databases Use client/server architecture to create a cohesive, flexible, and powerful computing environment Provide total integration of departmental and corporate IS resources Increase the availability of information and thereby maximize the value of information

Internet-based Architectures
Based on the concepts of client/server architecture and enterprisewide computing The Internet is the basis for a network connection from the outside world to the company, as well as with the organizations web site Organizations internal private Internet (intranet) - useful for distributing information within the organization

How Information Systems Support Organizations

Information Systems in an organization are developed to support the way the organization is structured.
Typically by functional departments Organizational Hierarchy

Information System - Classification

By Support Function

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Information System - Classification By

Function (Department)
An information system (IS) support each department in a corporation.

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IS Classification by Organization Levels

IS support needed by people depends on their role in the organization.

Top managers make strategic decisions Knowledge workers create and integrate knowledge Middle managers make tactical decisions Line managers make operations decisions Clerical workers use and manipulate information

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The Clerical Level

Clerical workers constitute a large class of employee who support managers at all levels of the company. Among clerical workers, those who use, manipulate, or disseminate information are referred to as data workers. These employee include book keepers, secretaries who work with word processors etc.
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The Operational Level

Operational, or first- line managers deal with the day-to day operations of the organization, making routine decision, which deal in general with activities such as short- term planning, organizing, and control

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The Knowledge-Work Level

They act as advisors and assistants to both top and middle management and are often subject-area experts. Many of these professional workers are classified as knowledge workers, people who create information and knowledge as part of their work and integrate it into the business.
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The Strategic Level

Top-level or strategic managers( the executive) make decision that deal with situation that may significantly change the manner in which business is done.

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Types of Decisions
Operational
Unstructured

Tactical

Strategic
New e-business initiatives Company re-organization

Cash Re-engineering a Management process

Semistructured

Production Scheduling

Employee Performance Mergers Evaluation Site Location Capital Budgeting

Structured Payroll

Strategic Management

The People

Decisions

Board of Directors Chief Executive Officer President

Develop Overall Goals Long-term Planning Determine Direction

Political Economic Competitive

Tactical Management

People

Decisions

Business Unit Managers Vice-President to Middle-Manager

short-medium range planning schedules budgets policies procedures resource allocation

Operational Management

People

Decisions

Middle-Managers to Supervisors

short-range planning production schedules day-to-day decisions use of resources enforce polices follow procedures

Decision Structure
Unstructured

Information Characteristics
Ad Hoc Unscheduled Summarized Infrequent Forward Looking External Wide Scope

Strategic Management

Semi-structured
Tactical Management Pre-specified Scheduled Detailed Frequent Historical Internal Narrow Focus

Structured

Operational Management

Transaction Processing Systems

What is a transaction?
Every business event that occurs during business operations Business events (transactions) can trigger other business events Each event (transaction) can be described by a number of data items Transaction processing systems (TPS) are designed to record and store the data that describes every business event that occurs frequently.

Transaction Processing Systems (continued)

TPSs were the first to be automated repetitive, consistent, high-volume tasks are ideal candidates for computerization TPSs provide foundation for all other information systems

Customer makes a purchase

POS system Transaction file

Update files

Inventory file
Sales file

Transaction Processing System (continued)

Some characteristics of TPSs

Process large volume of data Data output intended mainly for internal audience TPS operate regularly (on demand, daily, weekly, etc.) Require large storage (database) capacity Require high processing speed (due to the high volume) Input and output data known and well-understood (highly structured) Involves high level of detail but low computation complexity Requires high level of accuracy, data integrity, and security Requires high processing reliability; organizations cannot function for long without TPSs Inquiry processing supported

Methods of Processing Transactions

Batch Processing: simple, inexpensive
Employee timecards Data entry of timecard data Payroll transactions

Employee data: Pay rate Etc.

Process payroll

Employee paychecks

Cash on hand

Payroll summary

Methods of Processing Transactions

Online Processing: complex, expensive

Customer makes a purchase

Transaction history file POS system

Inventory file
Sales file

Methods of Processing Transactions

Hybrid Processing: simple, inexpensive, more accurate
Badge reader collects employee work data Payroll transactions

Whenever employees arrive / leave work

Employee data: Pay rate Etc. Normal payroll schedule: weekly, monthly, etc. Cash on hand

Process payroll

Employee paychecks

Payroll summary

Transaction Processing System (TPS) Usages

TPS automates routine and repetitive tasks that are critical to the operation of the organization, such as preparing a payroll, billing customers, Point-of-Sale, and Warehouse operations Data collected from this operation supports the MIS and DSS systems employed by Middle Management Primary purpose to perform transactions and collect data

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TPS Today
Traditionally, TPS were implemented on

mainframe systems using batch processing Online Transaction Processing (OLTP)

can be built on a client/server architecture

Internet (Intranet) Transaction Processing fast response time storage of large databases of graphics and videos real time low cost

Typical TPS Tasks

Order processing Accounts payable and receivable Inventory management, shipping, and receiving Payroll

Management Information Systems (MIS)

These systems access, organize, summarize, and display information for supporting routine decision making in the functional areas. Geared toward middle managers, MIS are characterized mainly by their ability to produce periodic reports such as a daily list of employees and the hours they work, or a monthly report of expenses as compared to a budget Typical uses would be in Pricing Analysis and Sales Management Decisions supported are more structured Primary purpose to process data into information
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Management Information Systems

(continued)

Provide routine information to managers in the functional areas

Reports Management Information System Scheduled Demand Exception

Business Transactions

TPS
Databases Internal External

Data Warehouse

MIS: The Big Picture

MIS provides information performance of an organization

about

the

MIS provides management with feedback

MIS: Feedback for an Organization

Q: How are we doing? A: Look at the report from the MIS

Generic reports: Sales, Orders, Schedules, etc. Periodic: Daily, Weekly, Quarterly, etc. Pre-specified reports

Obviously, such reports are useful for making good decisions.

Typical MIS Reporting

Periodic Scheduled Reports

Example: Monthly Financial Statements

Example: List of items out of stock

Exception Reports

Note :These reports contain information but they might not directly help you determine the best decision to make.

More MIS Reports

Demand Reports and Responses

Available whenever a manager needs them, updated in real-time.

Information is pushed to a managers computer Example: Report is pushed every time a supplier is late with a shipment

Push Reporting

Note: MIS Reporting is all about giving managers feedback and doesnt necessarily help directly with decision making.

Decision Support Systems (DSS)

These systems support complex non-routine decisions Primary purpose to process data into information DSS systems are typically employed by tactical level management whose decisions and what-if analyses are less structured This information system not only presents the results but also expands the information with alternatives DSS methodologies based Analytical Modeling

Mathematical Modeling Simulation OLAP-Cubes Data mining

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Analytical Modeling
Analytical Modeling helps predict the outcome of a decision. This directly helps you make a decision

Possibly an optimal decision

Note: With a DSS you can explore possible alternatives.

Analytical Modeling Cont

Examples Supply Chain Modeling Simulate what would happen if you reduced your inventory?
How many items would go out of stock? How much would you save? Is reducing inventory a good thing?

Analytical Modeling Supported by DSS

Type of Analysis Supported by DSS
1. What-if analysis
What if we cut advertising by 10% what would happen to sales?

2. Sensitivity analysis
Lets cut advertising by 1% repeatedly so we can see its relationship to sales

3. Goal-seeking analysis
Lets try increasing advertising until sales reach $1 million

4. Optimization analysis
What level of advertising maximizes our overall profit?

DSS Examples:
IFPS ( Interactive Financial Planning System) AAIMS (An Analytical Information Management System)

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MIS vs. DSS

MIS
Support Info about performance

DSS
Info and modeling to analyze problems

Report Form
Format

Periodic reports or On Demand Pre-specified Fixed format

Interactive Inquiries
Flexible and Adaptable Analytical modeling of data

Processing Extract and manipulate data

DSS Contd

In a DSS, a manager generates the report through an interactive interface

Flexible & Adaptable reports

DSS Reporting is produced through analytical modeling, not just computing an average, or plotting a graph.

Business Models are programmed into a DSS

Executive Support Systems (ESS)

ESS systems or Enterprise Information Systems (EIS) were originally implemented to support senior management. These systems have been expanded to support other managers within the enterprise At the senior management level they support Strategic Activities which deals with situations that may significantly change the manner in which business is done

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MIS , DSS and ESS: Another Difference

TPS
Operational Management Decisions

DSS
Tactical Management Decisions Strategic Management Decisions

MIS

ESS

Intelligent Support Systems (ISS)

Essentially, artificial intelligence (AI) these systems perform intelligent problem solving. One application of AI is expert systems. Expert systems (ESs) provide the stored knowledge of experts to nonexperts, so the latter can solve difficult or timeconsuming problems. These advisory systems differ from TPS, which centers on data, and from MIS, which concentrates on processing information. With DSS, users make their decisions according to the information generated from the systems. With ISS(ES), the system makes recommended decisions for the users based on the built-in expertise and knowledge.
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Knowledge Management Systems (KMS)

An additional level of staff support now exists between top and middle management. These are professional people, such as financial and marketing analysts that act as advisors and assistants to both top and middle management. They are responsible for finding or developing new knowledge (External Content) for the organization and integrating it with existing knowledge (Internal Content) KMS that support these knowledge workers range from Internet search engines and ISS systems, to Webbased computer-aided design and sophisticated data management systems
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Integrated Information Systems

Reasons for Integration Existing, functionally oriented information systems are deficient:
cannot give employees all the information they

need do not let different departments communicate effectively crucial sales, inventory, and production data often entered manually into separate computer systems

Integrated Information Systems

How to Integrate Information Systems Connect existing systems
addition of new applications
maximize the use of existing systems and allows the

Use Enterprise Resource Planning software

control all major business processes with a single

software architecture in real time increased efficiency to improve quality, productivity, and profitability

Summery: IS Classification

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Questions !!!!
A student Registration system at university A system that advice farmer about which fertilizers to use A hospital patient admission system A system that provide sales information to marketing manager A robotic system that paints car in a factory

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How Information Resources are Managed in Organizations

Responsibility for information resources shared by IS Department and end users. Organizations must determine who is responsible for planning, purchasing, developing, and maintaining information resources. Cooperation is essential.

Ways to Ensure IS Department / End User Cooperation

Joint project teams IS presence on executive committee Conflict resolution unit

Role of the IS Department

Shifting from technical to managerial orientation. Increasing focus on adding strategic value to the organization. As IS is challenged to add strategic value, management of IS becomes more complex. Chief Information Officer (CIO) heads IS in many organizations.

Career Opportunities in IT
Systems Analyst E-Commerce Specialist Business Analyst Telecomm / Network Specialist Database Administrator / Specialist System Operations Specialist

Summary (IS)

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Summary (IS) Contd..

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