Chapter 1

Introduction to Information
Systems

1.1 What is an Information System?

An Information system is a set of inter-related components that collects (or
retrieves), process, store and distribute information to support decision-making
and control, coordination, and visualisation in an organisation.

1.1.1 Differences Between Data and Information

Data Streams of raw facts representing events which occur in organisations or
physical environments before it is organised and arranged in a meaningful
way.
Information Data organised in a meaningful way.

Input The capture or collection of raw data from within the organisation or
from its external environment for processing in an information system.
Processing The conversion, manipulation, and analysis of raw input into a
form that is more meaningful for humans.
Output The distribution of processed information to the people who will use
it or to the activities for which it will be used.
Feedback Output that is returned to the appropriate members of the organi-
sation to help them evaluate or correct input.
Computer-Based Information System, CBIS Information systems that rely
on computer hardware and software for processing and dissemination in-
formation.
Formal System System resting on accepted and fixed definitions of data and
procedures, operating with pre-defined rules.

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 Formal systems use accepted and fixed definitions of data and procedures
for collecting, storing, processing, disseminating and using data. Systems are
structured and hard to change.
Informal systems, in contrast, rely on unstated rules of behaviour. An ex-
ample of an informal systems would be the “Office Grapevine”. While informal
systems are often vital to the success of a company, they are harder to analyse
and study due to their free-form nature, and will not be discussed further.
Computers and software are distinct from Information Systems.
Analogy with hammer, nails, wood and bricks in a house. The are the
materials which a house is built from, but a house is more than just a collection
of materials.
Landscaping, architecture, sewerage, internal decorating, etc. also required.
Similarily for CBIS. Computer hardware and software are the building bricks,
but they cannot alone produce the information a particular organisation needs.
To understand CBIS, must understand problems they are designed to solve,
architectural and design elements, and organisational processes leading to solu-
tions.

1.2 Why Information Systems?

Three reason for recent growth in need for CBIS:

• Emergence of the Global Economy

• Transformation of the Industrial Economies
• Transformation of the Business Enterprise

1.2.1 Emergence of the Global Economy

• Imports/Exports much more important
• Success dependant on global operating
• Increases value of information
• CBIS needed for analysis on a global scale
• Markets no longer protected. Firms need to be fit to compete with foreign
competitors
• Powerful communication and informations systems required

1.2.2 Transformation of Industrial Economies

• Major powers moving from industrial-based economy to knowledge/information-
based service economy. Manufacturing moves to low-wage economies.
• In 1976 in US, more white-collar workers than farm and blue-collar workers
• People employed in sales, education, healthcare, banks, insurance and
law, and in service industries such as copying, software development and
deliveries.

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 • Work involves knowledge and information
• Accounts for 60% of the US GNP and 55% of the labour force.
• New industries grown which are knowledge- and information-intensive,
such as computer game development.
• Old industries use information much more and so hire much more special-
ists than before.
• New organisations, such as environmental engineering firms, did not exist
30 yrs ago.
• IT takes up 70% of invested capital in service industries like finance, in-
surance and real estate.
• Information and technology are critical, strategic assets for firms. Quality
of systems affect productivity and decisions about IT critically important
to prosperitiy and survival of firm.

1.2.3 Transformation of the Business Enterprise

• Organisation in firms changing
• Traditionally had pyramid structure: hierarchial, centralised, structure
system of specialists, with fixed set of operating procedures
• New style is flattened, decentralised, flexible arrangement of generalists;
relying on near-instant information to deliver mass-customised products/services
to individual clients. This style is still evolving, but believed to be best
way forward.
• Traditional method used formal plans, rigid labour division, and formal
rules; appealing to loyalty of employees.
• New method relies on informal commitments and networks to establish
goals, flexible arrangements of teams and individuals working in task
forces; customer orientationto achieve coordination among employees and
appeals to professionalism.
• Firms even more dependant on knowledge, learning, and decisions of em-
ployees.

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Chapter 2

Levels and Types of

Computer-Based
Information Systems

2.1 Levels of Information System

There are four different levels of information system:

Operational-level systems Information systems that monitor the elementary

activities and transactions of the organisation.
Knowledge-level systems Information systems that support knowledge and
data workers in an organisation.
Management-level systems Information systems that support the monitor-
ing, controlling, decision-making, and administrative activities of middle
managers.
Strategic-level systems Information systems that support the long-range plan-
ning activities of senior management.

2.2 Types of Information System

2.2.1 Transaction Processing System (TPS)
Definition: A Transaction Processing System, TPS, is a computerised system
that performs and records the daily routine transactions necessary to conduct
the business; these systems serve the operational level of the organisation

• Examples are Sales Order Entry Systems, Hotel Reservation Systems, Pay-
roll, Employee Record-keeping and Shipping.
• Five functional levels:
1. Sales/Marketing

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 2. Manufacturing/Production
3. Finance/Accounting
4. Human Resources
5. Other
• TPS very critical to business. Failure could bring down the business (like
if UPS lost their package tracking system).
• At operational level, tasks, resources and goals predefined, and highly
structured, such as granting credit.
• TPS monitored for status of internal operation and firms relationship to
external environment.
• TPS major producers of input for other systems (e.g Payroll and other ac-
counting TPS supplies data to general ledger system, maintaining records
on income/expenses, producing reports like income statements and bal-
ance sheets.

2.2.2 Knowledge Work Systems and Office Automation

Systems
Definition: A Knowledge Work System, KWS, is an information system that
aids knowledge workers in the creation and integration of new knowledge in the
organisation.

Definition: An Office Automation System, OAS, is a computer system, such

as word processing, e-mail system, or scheduling system, that is designed to
increase the productivity of data workers in the office.

• KWS and OAS serve organisation at the knowledge level

• KWS aid knowledge workers; OAS aid data workers (though also used by
knowledge workers)
• Knowledge workers usually hold formal university degrees, and are mem-
bers of a recognised profession, such as engineers, lawyers, doctors and
pharmacists. Role is to create new knowledge, and KWS assist in this
task, as well as smoothing integration of new knowledge into business
• Data workers typically less formal, advanced education degrees. Process
information rather than create it. Secretaries, accountants, filing clerks,
or managers who use, manipulate and disseminate information.
• OAS designed to increase productivity of data workers in office by sup-
porting coordination and communication. OAS coordinates workers, geo-
graphical units and functional areas.

• OAS includes Word Processors, DTP and document imaging.

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2.2.3 Management Information Systems
Definition: Management Information Systems, MIS, are information systems
at the management level of an organisation that serves the functions of planning,
controlling and decision-making by providing routine summary and exception
reports.

• MIS serve management level

• Provide managers with reports (or on-line access) to current performance
and historical records.
• Oriented almost exclusively to internal events, serving functions of plan-
ning, controlling and decision-making.
• Generally take input from TPSs.

• Serve managers interested in weekly, monthly, annual reports, addressing

structured questions known well in advance.
• Generally inflexible with little analytic ability.
• Simple analysis such as summaries/comparisons rather than sophisticated
mathematical models or statistical techniques.

Characteristics of Management Information Systems

1. MIS support structure decisions at the operational and management con-
trol levels. However, they are also useful for planning purposes of senior
management staff.
2. MIS are generally reporting and control oriented. They are designed to
report on existing operations and therefore to help provide day-to-day
control of operations.
3. MIS rely on existing corporate data and data flows.
4. MIS have little analytic capability
5. MIS generally aid in decision making using past and present data.
6. MIS relatively inflexible
7. MIS have internal rather than external orientation.

2.2.4 Decision Support Systems

Definition: Decision Support Systems, DSS, are information systems at the
management level of an organisation that combines data and sophisticated ana-
lytical models or data analysis tools to support semi-structured and unstructured
decision-making.

• DSS serve the management level

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 • Aid in decisions that are semi-structured, unique and rapidly changing, not
easily specified in advance. Responsive and quick enough to run several
times per day to respond to changing information.
• DSS draw from TPS, but also external sources (such as stock prices and
competitor prices)
• DSS have large analytical capability with many models to analyse data
and condense large volumes of data into a useful form.
• DSS tend to be user-friendly and interactive

Example DSS is voyage-estimation of metals company. Carries bulk cargo

of coal, oil, ores and finished product. Owns some vessels, charters others and
bids for shipping contracts in open market to carry general cargo.
Voyage estimation system uses financial and technical details as inputs.
Financial inputs include ship/time costs, freight rates for cargo types and
port costs.
Technical includes ship cargo capacity, speed, distances, fuel/water consump-
tion and loading patterns.
Can answer questions like the following:

• Given customer delivery schedule and offered freight rate, which vessel at
what rate will maximise profits?
• What is ideal speed for vessel to meet schedule and maximise profits?
• What is optimal loading pattern for ship bound for US West Coast from
Malaysia?

Characteristics of Decision Support Systems

1. DSS offer flexibility, adaptability and quick response
2. DSS operate with little or no assistance from professional programmers
3. DSS provide support decisions and problems whose solutions cannot be
specified in advance.
4. DSS use sophisticated data analysis and modelling tools.

2.2.5 Executive Support Systems

Definition: An Executive Support System, ESS, is an information system at
the strategic level of an organisation designed to address unstructured decision-
making through advanced graphics and communications

• ESS serve strategic level

• ESS address unstructured decisions and create generalised computing and

communications environments rather than give a fixed application or com-
puting capability

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• ESS designed to incorporate data about external events such as new tax
laws or competitiors, and draw from internal MIS and DSS.
• ESS filter, compress and track critical data, emphasise reduction of time
and effort to get information
• Heavy emphasis on data visualisation
• ESS do not solve specific problems, providing generalised capacity appli-
cable to changing problems, so less use of analytical models.

ESS answer questions such as:

• What business should we be in?

• What are the competitiors doing?
• What new acquisitions would protect us from cyclical business swings?
• Which units should we sell to raise capital for acquisitions?

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Chapter 3

Artificial Intelligence and

Expert Systems

3.1 Artificial Intelligence

Artificial Intelligence, AI, is the effort to develop computer-based systems that
can behave like humans, with the ability to learn languages, accomplish physical
tasks, use a perceptual apparatus and emulate human expertise and decision
making.
Successful AI systems are based on human expertise, knowledge, and selected
reasoning patterns, but do not exhibit human intelligence. They do not come
up with new or novel solutions. They lack the common sense and generality of
naturally intelligent human beings.
Human intelligence is vastly complex, much broader than computer intelli-
gence. Key factor is ability to develop association and use metaphors, analogies
and similes, such as like or as.
Using analogy and metaphors, humans can create new rules, apply old rules
to new situations, and act intuitively and instinctively without rules. Common
sense and generality resides in ability to create metaphor and analogy.
Human intelligence also enables ability to impose a conceptual apparatus
on the surrounding world. Meta-concepts like cause-and-effect and time, and
concepts of lower order like breakfast, lunch, dinner, are imposed by humans on
the environment.
Thinking in terms of these concepts, and acting on them are central charac-
teristics of intelligent human behaviour.
Business in interested in AI for several reasons:
• Preservation of expertise that may be lost through retirement, resignation,
or death of acknowledged expert.
• Storage of information in active form, creating organisational knowledge
base, knowledge resource for employees to learn rules-of-thumb not found
in textbooks.
• Creation of mechanism not subject to human weaknesses, such as fatigue
and worry, especially in case of tasks environmentally, physically or men-
tally dangerous. Such systems can be useful advisors in times of crisis.

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 • Elimination of routine and unsatisfying tasks held by people.
• Enhancement of knowledge base by suggesting solutions which are too
massive and complex for fast human analysis.

3.1.1 Expert Systems

Definition: An Expert System is a knowledge-intensive computer program that
captures the expertise of a human in limited domains of knowledge.

Knowledge Base Model of human knowledge used by expert systems.

Rule Base Collection of knowledge in an AI system that is represented in the
form of IF-THEN rules.
Rule-based Expert System AI program with large number of interconnected
and nested rules that are the basis for knowledge in the system.
Knowledge Frames Method of organising expert system knowledge into chunks;
relationships based on shared characteristics determined by the user.

• Expert systems try to capture essence of human expertise and automate

decision-making.
• Use knowledge base to model knowledge.
• Rules are IF-THEN statements. Generally have some condition, cond,
which if true, means some action, act is executed.

IF
cond
THEN
act

An example would be:

IF
under 21 yrs of age
THEN
refuse entry

• Knowledge frames group object with shared characteristics.

• Development requires experts and knowledge engineer, who is an AI
specialist who translates the knowledge into form suitable for system de-
sign.
• Only certain classes of problem suitable. Must have few possible outcomes,
all of which are known in advance.
• Development time and costs high. Knowledge base fragile and brittle.
System cannot learn new knowledge by itself.

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• Much knowledge unmappable, such as knowledge based on analogy, intu-
ition and a sense of things.
• Most effective for automation of lower-level clerical functions, such as
granting of credit.
• Generally unsuitable for decision-making at management level due to di-
verse sources, and need for intuitive grasp of problems.

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Chapter 4

System Development and

Organisational Change

4.1 Organisational Change

There are four major types of organisational change:

1. Automation
2. Rationalisation of Procedures
3. Business Re-engineering
4. Paradigm Shift

4.1.1 Automation
Definition: Using the computer to speed up the performance of existing tasks

• Very common form of IT-enabled organisational change.

• Assists employees in performing tasks (such as calculating paycheques
and payroll registers, bank-teller access to customer accounts; nationwide
airline reservation system).

4.1.2 Rationalisation of Procedures

Definition: The streamlining of standard operating procedures, eliminating ob-
vious bottlenecks, so that automation make operating procedures more efficient.

• Deeper change - streamlining of procedures to improve efficiency.

• Automation often reveals bottlenecks in production, existing procedures
become painfully cumbersome.
• Procedures change to remove bottlenecks

Example in banks, which have standard rules for issuing account numbers,
and standard methods for calculating interest and account balances.

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4.1.3 Business Re-engineering
Definitions: The radical re-design of business processes, combining steps to cut
waste and eliminating repetitive, paper-intensive tasks to improve cost, quality
and service and to maximise the benefits of information technology.
• More radical change
• Use IT to analyse, simplify and redesign business processes
• Re-organise work-flows and eliminates repetitive, paper-intensive tasks
(possible causing job losses).
Ford invoice-less processing widely-cited example. Ford had over 500 people
in its North American accounts payable division. Clerks spent most of their
time resolving discrepancies between purchase orders, receiving documents, and
invoicing.
System was re-engineered wherein purchasing department enters order into
online database checked by receiving department when items arrive. If received
goods match purchase order, cheque automatically generated to be sent to the
vendor, with no need for invoice.
Ford reduced its head-count in accounts payable by 75% and produced more
accurate financial information.

4.1.4 Paradigm Shift

Definition: Radical reconceptualisation of the nature of the business and the
nature of the organisation
• Change in view of business and its organisation
• Affects design of entire organisation
• Transforms how business conducts business and possibly nature of organ-
isation.
Note that there is a significant business-risk involved in both Business Re-
engineering and Paradigm Shifts due to the extent of the changes involved.
Changes often very difficult to orchestrate and can be very costly.

4.2 Systems Development

Systems development is the activities that go into producing an information
systems solution to an organisational problem or opportunity.
There are six major steps involved in developing Information Systems:
1. Analysis
2. Design
3. Programming
4. Testing
5. Conversion
6. Production and Maintenance

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4.2.1 Systems Analysis
Definition: The analysis of a problem that the organisation will try to solve
with an information system

• Analysis consists of defining the problem, identifying its causes, specifying

the solution, and identifying information requirements.
• Creates road map of existing organisation and systems; identifies primary
owners and user of data in organisation
• Performs feasibility study, which determines whether solution is achiev-
able, given organisations resources and constraints.
• Information requirements is a detailed statement of the information needs
that a new system must satisfy; identifies who needs what information,
and when, where and how information is needed.
• Establishing information requirements crucial; can make or break infor-
mation system solution.

4.2.2 Systems Design

Definition: Detailing how a system will meet the information requirements as
determined by the systems analysis.

• Shows how system will meet objectives set out be analysis.

• Design is overall plan or model for system (similar to blueprint for a build-
ing or house).
• Designer details system specifications that deliver functions identified dur-
ing analysis.
• Logical design lays out the components of information system and rela-
tionship to each other as they would appear to users.
• Physical design translates the abstract logical model into specific technical
design for the new system.
• End user input crucial. System must reflect needs of user, not bias of
technical staff.

4.2.3 Completing Development Process

Programming Process of translating the system specifications prepared dur-
ing design stage into program code.
Testing Exhaustive and thorough process that determines whether system pro-
duces desired results under known conditions.
Conversion Process of changing from old system to the new system.
Production Stage after new system is installed and conversion is complete;
when system is reviewed by users and technical specialists to see how well
it meets original goals.

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Maintenance Changes in hardware, software, documentation, or procedures
to production system to correct errors, meet new requirements, or improve
processing efficiency.

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