information system unit 1

                         Information system 

 

UNIT-1 INFORMATION

DEFINITION:-

Information is defined as knowledge obtained from investigation, study, or instruction.

Information means data that is accurate and timely, specific and organized for a purpose, presented within a

context that gives it meaning and relevance, and can lead to an increase in understanding and decrease in

uncertainty.

Information is valuable because it can affect behaviour, a decision, or an outcome.

For example, if a manager is told his/her company's net profit decreased in the past month, he/she may use

this information as a reason to cut financial spending for the next month. A piece of information is considered

valueless if, after receiving it, things remain unchanged.

ATTRIBUTES OF INFORMATION:-

Quality of information refers to its fitness for use or its reliability. Some of the attributes of information which

influence the quality of information are as follows:

1) Timeliness: Timeliness means that information must reach the recipients within the prescribed time frame.

Timely information can ensure correct executive action at an early stage. The characteristic of timeliness, to

be effective, should also include current information.

2) Accuracy: Accuracy is another key-attribute of management information. It means that information is free

from mistakes and errors, is clear and accurately reflects the meaning of data on which it is based. It conveys

an accurate picture to the recipient, who may require a presentation in graphical form rather than tabular form.

3) Relevance: Relevance is yet another key attribute of management information. Information is said to be

relevant if it answers specifically for the recipient what, why, where, who and why? In other words, the MIS

should serve reports to managers, which are useful, and the information helps them make decisions.

4) Adequacy: Adequacy means information must be sufficient in quantity. MIS must provide reports

containing information, which is required in deciding processes of decision-making.

5) Completeness: The information, which is provided to a manager, must be complete and should meet all

his needs. Incomplete information may result in wrong decisions and thus may prove costly to the

organization.

6) Explicitness: A report is said to be of good quality if it does not require further analysis by the recipient

for decision-making. Thus the reports should be such that a manager does not waste any time on the processing

of the report, rather he should be able to extract the required information directly.

7) Exception based: Top managers need only exception reports regarding the performance of the

organization. Exception reporting principle states that only those items of information, which will be of

particular interest to a manager, are reported. This approach results in saving precious time of the top

management and enables the managers to devote more time in pursuit of alternatives for the growth of the

organization.

 

CLASSIFICATION OF INFORMATION PERSPECTIVES ON INFORMATION SYSTEM:-

WHAT IS AN INFORMATION SYSTEM?

An information system can be defined technically as a set of interrelated components that collect (or retrieve),

process, store and distribute information to support decision making and control in an organisation.

It supports decision making, coordination and control; and it may also help managers and workers to analyse

problems, visualize complex subjects and create new products.

It contains information about significant people, places and things within the organisation or in the

environment surrounding it.

Information means data that have been shaped into a form that is meaningful and useful to human beings.

In contrast, data are streams of raw facts representing events occurring in organisation or the physical

environment before they have been organised and arranged into a form that people can understand and use.

Example: supermarket or mall checkout counter scan millions of pieces of data from barcode, which describes

each product. Such pieces of data can be totalled and analysed to provide meaningful information , such as

the total number of bottles of dish detergent sold at a particular store, which brand of dish detergent were

selling the most rapidly at that store, or the total amount spent on that brand of dish detergent at that store.

Three activities in an information system produce the information that organisations need to make decisions,

control operations and analy se problems and create new products or services.

These activities are: INPUT, PROCESSING and OUTPUT.

Input collects raw data from within the organisation or from its external environment.

Processing converts this raw input into a meaningful form.

Output transfers the processed information to the people who will use it or to the activities for which it will

be used.

One more service is Feedback, in which output that is returned to appropriate members of the organisation,

to help them to evaluate or correct it in the input stage.

 

Environment actors can be customers, suppliers, competitors, stackholders, and regulatory agencies interact

with the organisation and its information system.

Example: In the IPL system for selling tickets through its website. In this input, processing and output

activities will be,

Input: order data for tickets, such as purchasers name, address, credit card number, number of tickets ordered

and the date of the game for which the ticket is being prepared.

Processing: computers store these data and process them to calculate order totals, to track ticket purchases,

and to send requests for payment to credit card companies.

Output: tickets to print out, receipts for order, and reports on online ticket orders.

This means system provides meaningful information, such as the number of tickets sold for a particular game,

the total number of tickets sold each year and frequent customers.

DIMENSIONS OF INFORMATION SYSTEM:-

 

The three dimensions are:

1. Organisations

2. Management

3. Information technology

1. ORGANISATIONS:

Organisation have structure that is composed of different levels and specialities.

The levels are:

1. senior management

2. middle management

3. operational management

Senior Management makes long range strategic decisions about product and services as well as ensures

financial performance of the firm.

Middle Management carries out the programs and plans of senior management.

Operational Management is responsible for monitoring the daily activities of the business.

Knowledge workers such as engineers, scientists or architects design new products or services and create

new knowledge for the firm.

Data workers such as secretaries or clerks assist with scheduling and communication at all the levels of the

firm.

Production or service workers produce the product and deliver the services.

Experts are employed and trained for different business functions. The major business functions or

specialized task performed by the business organisations are:

1. sales and marketing

2. manufacturing and production

3. finance and accounting

4. human resources

 

FUNCTION PURPOSE

1. Sales and Marketing Selling the organisation’s products and services

2. Manufacturing and Production Producing and delivering products and services

3. Finance and Accounting Managing the organisation’s financial assets and maintaining the

organisation’s financial records

4. Human resources Attracting, developing, and maintaining the organisation’s labour

force, maintaining employee records

2. MANAGEMENT:

Management’s job is to make sense out of many situations faced by the organisations, make decision and

formulate action plans to solve organisational problems.

Managers perceive business challenges in the environment.

They set the organisational strategy for responding to those challenges.

They allocate the human and financial resources to coordinate the work and achieve success.

3. INFORMATION TECHNOLOGY:

Information technology is one of many tool managers use to cope up with change.

It includes computer hardware, computer software, data management technology, networking and

telecommunication technology, networks, internets, intranets, extranets, World Wide Web.

All of these technologies, along with the people required to run and manage them, represent resources that

can be shared throughout the organisation and constitute the firm’s information technology infrastructure.

The IT infrastructure provides the foundation or platform on which the firm can build its specific

information system.

Each organisation must carefully design and manage its IT infrastructure so that it has the set of technology

services it needs for the work it wants to accomplish with information system.

Computer hardware is the physical equipment used for input, processing and output activities in an

information system. It consist of following: computers of various sizes and shapes; various input,, output

and storage devices; and telecommunication devices that link computer together.

Computer software consist of detailed pre-programmed instruction that control and coordinate the

computer hardware components in an information system.

Data management technology consist of the software governing organisation of data on physical storage

media.

Networking and telecommunications technology consists of both physical devices and software, links

the various pieces of hardware and transfers data from one physical location to another. Computers and

communication equipment can be connected in networks for sharing voice, data, images, sound and video.

Network links two or more computers to share data and resources, such as printer.

Internet is a global ‘network of networks’ that uses universal standards to connect millions of different

networks with more than 1.4 billion users in over 230 countries around the world.

 

Internal corporate networks based on internet technology are called Intranets.

Private intranets extended to authorised users outside the organisation are called Extranets.

World Wide Web is a service provided by the internet that uses universally accepted standards for storing,

retrieving, formatting and displaying information in a page format on the internet.

CONTEMPORARY APPROACHES TO INFORMATION SYSTEM:-

1. Technical Approach

2. Behavioural Approach

3. Socio-technical Approach

TECHNICAL APPROACH:

The technical to information system emphasizes on mathematical based models to study information

system, as well as the physical technology and formal capabilities of these systems.

The disciplines that contribute technical approaches are: computer science, management science and

operational research.

Computer Science is concerned with establishing theories of computability, methods of computation and

methods of efficient data storage and access.

Management Science emphasises on the development of models for decision making and management

practices.

Operational research focuses on mathematical techniques for optimising selected parameters of

organisation such as transportation, inventory control and transaction cost.

BEHAVIORAL APPROACH:

An important part of the information system field is concerned with behavioural issues that arise in the

development and long term maintenance of information system.

Issues such as strategic business integration, design, implementation, utilization, and management cannot

be explored usefully with the models used in the technical approach.

The disciplines that contribute behavioural approaches are: economics, sociology and psychology.

 

Sociologist study information system with an eye towards how groups and organisation shape the

development of system and also how system affect individuals, groups and organisations.

Psychologist study information system with an interest in how human decision makers perceive and use

formal information.

Economists study information system with an interest in understanding the production of digital goods,

the dynamics of digital markets, and how new information system change the control and cost structures

within the firm.

SOCIO-TECHNICAL APPROACH:

In this, the four main components are:

1. Suppliers of hardware and software (the technologists)

2. Business firms making investments and seeking to obtain value from the technology

3. Managers and employees seeking to achieve business value (and other goals)

4. The contemporary legal, social, and cultural context (the firm’s environment)

In this, the optimal organisational performance is achieved by jointly optimising both the social and

technical systems used in production.

In socio-technical perspective, the performance of the system is optimised when both the technology and

the organisation mutually adjust to one another until a satisfactory fit is obtained.

Adopting a socio-technical system, helps to avoid purely technological approach to information system.

ORGANISATIONS AND INFORMATION SYSTEM:-

Organizations and information systems have a mutual influence on each other.

The information needs of an organization affect the design of information systems and an organization

must be open itself to the influences of information systems in order to more fully benefit from new

technologies.

The organization's environment, culture, structure, standard operating procedures, politics and

management decisions are mediating factors that influence the interaction between information technology

and organizations.

 

The above figure shows the two-way relationship between organizations and information technology.

This complex two-way relationship is mediated by many factors, not the least of which are the decisions

made—or not made—by managers.

Other factors mediating the relationship include the organizational culture, structure, politics, business

processes, and environment.

WHAT IS ORGANISATION?

From a technical view, an organization is a formal, legal, social structure that processes resources, or inputs,

to produce outputs.

The firm is seen as infinitely malleable, with capital and labor substituting for each other quite easily.

The above figure shows the technical microeconomic definition of the organization.

In the microeconomic definition of organizations, capital and labor (the primary production factors provided

by the environment) are transformed by the firm through the production process into products and services

(outputs to the environment).

The products and services are consumed by the environment, which supplies additional capital and labor as

inputs in the feedback loop.

A behavioral definition of an organization is that it is a collection of rights, privileges, obligations, and

responsibilities that is balanced over time through conflict and conflict resolution.

This definition suggests that building new information systems or rebuilding old ones involves much more

than a technical rearrangement of machines or workers.

Technological change requires changes in who owns and controls information, who has the right to access and

update that information, and who makes decisions about whom, when, and how.

The above figure shows the behavioral view of organizations.

The behavioral view of organizations emphasizes group relationships, values, and structures.

The technical and behavioral views of organizations complement one another.

The technical definition describes how thousands of firms in competitive markets combine capital and labor

with information technology, whereas the behavioral model describes how technology affects the

organization's inner workings.

FEATURES OF ORGANISATION:-

All modern organizations can be seen as bureaucracies which share some essential characteristics: clear

division of labor, hierarchy, explicit rules and procedures, impartial judgments, technical qualifications for

positions, and maximum organizational efficiency. Additionally, all organizations develop routines and

business procedures, politics, and cultures.

Features are:

1. Routines and business processes

2. Organisational politics

3. Organisational culture

4. Organisational environment

1. ROUTINES AND BUSINESS PROCESSES:

All organisation, including business firms, become very efficient over time because individuals in the firm

develop routines for producing goods and services.

Routines sometimes called standard operating procedures, are precise rules, procedures and practices that

have been developed to cope up with virtually all expected situations.

Business processes are collections of routines, or standard operating procedures (SOPs), which enable a

firm's efficiency.

 

All organizations are composed of individual routines and behaviors, a collection of which make up a

business process.

A collection of business processes make up the business firm.

New information system applications require that individual routines and business processes change to

achieve high levels of organizational performance.

The above figure shows routines, business processes, and firms.

2. ORGANISATIONAL POLITICS:

People in the organisation occupy different positions with different specialities, concerns, and perspectives.

As a result, they naturally have divergent view-points about how resources, rewards, and punishments

should be distributed.

These differences matter to both managers and employees, and they result in political struggle for resources,

competition, and conflict within every organisation.

Political resistance is one of the great difficulties of bringing about organisation change especially the

development of new information system.

3. ORGANISATIONAL CULTURE:

Organizational culture is the set of fundamental assumptions about what products the organization should

produce, how it should produce them, where, and for whom.

Organizational culture is a powerful unifying force that restrains political conflict.

 

However, technological change that threatens commonly held cultural assumptions usually meets great

resistance.

No two organizations are identical.

Organizations have different structures, goals, constituencies, leadership styles, tasks, and surrounding

environments.

Organisational culture is a powerful unifying force that restrains political conflicts and promotes common

understanding, agreement on procedures, and common practices.

Example: You can see organisational culture at work by looking around your university or college. Some

assumptions of university life are that professors know more than students, the reason students attend

college is to learn, and classes follow a regular schedule.

4. ORGANISATIONAL ENVIRONMENT:

The above figure shows environment and organisations have reciprocal relationship.

Organisations reside in environments from which they draw resources and to which they supply goods and

services.

Organizations have different social and physical environments, which exert a powerful influence on the

organization's structure.

Information systems help organizations respond to their surrounding environments, from which they draw

resources and to which they supply goods and services.

Information systems are key tools for environmental scanning, helping managers identify external changes

that might require an organizational response.

Environments shape what organizations can do, but organizations can influence their environments and

decide to change environments altogether.

Information technology plays a critical role in helping organizations perceive environmental change and in

helping organizations act on their environment.

 

IMPACT OF INFORMATION SYSTEM ON ORGANISATION:-

1. Economic Impact

2. Organisational and behavioural impact

ECONOMIC IMPACT:-

IT also affects the cost and quality of information and changes the economics of information.

Information technology helps firms contract in size because it can reduce transaction costs—the costs

incurred when a firm buys on the marketplace what it cannot make itself.

We have two theories: transaction cost theory and agency cost theory.

1. Transaction cost theory:

According to transaction cost theory, firms and individuals seek to economize on transaction costs,

much as they do on production costs.

Using markets is expensive because of costs such as locating and communicating with distant suppliers,

monitoring contract compliance, buying insurance, obtaining information on products.

Traditionally, firms have tried to reduce transaction costs through vertical integration, by getting bigger,

hiring more employees, and buying their own suppliers and distributors, as both General Motors and

Ford used to do.

In the above figure, as transaction costs decrease, firm size (the number of employees) should shrink

because it becomes easier and cheaper for the firm to contract for the purchase of goods and services in

the marketplace rather than to make the product or offer the service itself.

Firm size can stay constant or contract even as the company increases its revenues.

For example, when Eastman Chemical Company split off from Kodak in 1994, it had $3.3 billion in

revenue and 24,000 full-time employees. In 2011, it generated over $7.2 billion in revenue with only

10,000 employees.

2. Agency cost theory:

Information technology also can reduce internal management costs.

According to agency cost theory, the firm is viewed as a “nexus of contracts” among self-interested

individuals rather than as a unified, profit-maximizing entity.

 

A principal (owner) employs “agents” (employees) to perform work on his or her behalf.

However, agents need constant supervision and management; otherwise, they will tend to pursue their

own interests rather than those of the owners.

As firms grow in size and scope, agency costs or coordination costs rise because owners must expend

more and more effort supervising and managing employees.

In the above figure, by reducing overall management costs, information technology enables firms to

increase revenues while shrinking the number of middle managers and clerical workers.

By concluding, we can say, because IT reduces both agency and transaction costs for firms, we should

expect firm size to shrink over time as more capital is invested in IT. Firms should have fewer managers,

and we expect to see revenue per employee increase over time.

ORGANISATIONAL AND BEHAVIORAL IMPACTS:-

Theories based in the sociology of complex organizations also provide some understanding about how

and why firms change with the implementation of new IT applications.

1. IT Flattens Organisation

2. Post Industrial Organisation

3. Understanding Organisational Resistance to change

1. IT Flattens Organisation:

In the above figure, information system can reduce the number of levels in an organisation by providing

managers with information to supervise larger number of workers and by giving lower-level employees

more decision making authority.

Large, bureaucratic organizations, which primarily developed before the computer age, are often

inefficient, slow to change, and less competitive than newly created organizations.

Some of these large organizations have downsized, reducing the number of employees and the number

of levels in their organizational hierarchies.

 

Behavioral researchers have theorized that information technology facilitates flattening of hierarchies

by broadening the distribution of information to empower lower-level employees and increase

management efficiency (see Figure).

IT pushes decision-making rights lower in the organization because lower-level employees receive the

information they need to make decisions without supervision.

Because managers now receive so much more accurate information on time, they become much faster

at making decisions, so fewer managers are required.

Management costs decline as a percentage of revenues, and the hierarchy becomes much more efficient.

2. Post Industrial Organisation:

Postindustrial theories based more on history and sociology than economics also support the notion that

IT should flatten hierarchies.

In postindustrial societies, authority increasingly relies on knowledge and competence, and not merely

on formal positions.

Hence, the shape of organizations flattens because professional workers tend to be self-managing, and

decision making should become more decentralized as knowledge and information become more

widespread throughout the firm.

Information technology may encourage task force-networked organizations in which groups of

professionals come together—face to face or electronically— for short periods of time to accomplish a

specific task (e.g., designing a new automobile); once the task is accomplished, the individuals join other

task forces.

The global consulting service Accenture is an example. Many of its 246,000 employees move from

location to location to work on projects at client locations in more than 120 different countries.

3. Understanding Organisational Resistance to Change:

There are several ways to visualize organizational resistance.

Research on organizational resistance to innovation suggests that four factors are paramount: the nature

of the IT innovation, the organization’s structure, the culture of people in the organization, and the tasks

impacted by the innovation (see Figure).

Here, changes in technology are absorbed, interpreted, deflected, and defeated by organizational task

arrangements, structures, and people.

 

In this model, the only way to bring about change is to change the technology, tasks, structure, and

people simultaneously.

Because organizational resistance to change is so powerful, many information technology investments

flounder and do not increase productivity.

Indeed, research on project implementation failures demonstrates that the most common reason for

failure of large projects to reach their objectives is not the failure of the technology, but organizational

and political resistance to change.

IMPACT OF IT ON MANAGEMENT:-

The Internet, especially the World Wide Web, has an important impact on the relationships between many

firms and external entities, and even on the organization of business processes inside a firm.

The Internet increases the accessibility, storage, and distribution of information and knowledge for

organizations.

In essence, the Internet is capable of dramatically lowering the transaction and agency costs facing most

organizations.

For instance, brokerage firms and banks in New York can now deliver their internal operating procedures

manuals to their employees at distant locations by posting them on the corporate Web site, saving millions

of dollars in distribution costs.

A global sales force can receive nearly instant product price information updates using the Web or

instructions from management sent by e-mail.

Vendors of some large retailers can access retailers’ internal Web sites directly to find up-to-the-minute

sales information and to initiate replenishment orders instantly.

Businesses are rapidly rebuilding some of their key business processes based on Internet technology and

making this technology a key component of their IT infrastructures.

If prior networking is any guide, one result will be simpler business processes, fewer employees, and much

flatter organizations than in the past.