UNIT I - INTRODUCTION

DATA, INFORMATION, INFORMATION SYSTEM – REFER CLASS NOTES

EVOLUTION
From small businesses to large corporations, an information system (MIS) is the backbone to a
company’s operation. Over the years, the role of IS has evolved as technology became more
sophisticated. Here’s the fascinating history of IS and how it is currently changing.
The Evolution of Information Systems (IS)
An information system (IS) is a computer system that gathers data from multiple business systems,
analyses the information, and provides reports that help guide management in decision-making. IS
started as a data capturing and processing system and evolved into a more complex and intelligent
system. Here’s how IS evolved through the years.
1950-1960: Electronic Data Processing (EDP)
Electronic Data Processing (EDP) systems, also called Transaction Processing Systems (TPS), were
ground breaking at the time. It was the first large-scale computer information system to centralize and
process day-to-day transactions and activities such as cash deposits, ATM transactions, and payment
orders. Shifting from manual to electronic made transaction processing and record-keeping a much
faster process.
1960-1970: Management Information Systems (MIS)
It wasn’t long before the EDP system was upgraded to a Management Information System (MIS) that
was able to generate reports from the data it collected. MIS pulled reports from historical data to
determine cost trends, do a sales analysis, keep track of inventory, and measure production
performance.
When managers evaluated the information in these reports, they could see which areas of the business
were underperforming and adjust decisions accordingly.
1970-1980: Decision Support Systems (DSS)
Decision Support System (DSS) provided historical and ad hoc reports on both internal and external
information. For example, internal sales reports and external market pricing. This advancement
brought a new level of decision-making to businesses. Management could more accurately forecast
sales, perform a risk analysis, and make bolder strategic decisions. It was during this era that
personal computers entered the workplace. PCs were connected to the main server so information
became accessible to employees throughout the company. This led to a significant boost in
productivity. With this came the need for expert skills to manage these computer networks.
Information technology (IT) soon became a burgeoning career and a degree in Management
Information Systems became sought after.
1980-1990: Executive Information Systems (EIS)
As PCs put power in the hands of executives, they could purchase software tailored to their
department’s needs, such as accounting, project management, and HR systems. It resulted in multiple
systems within an organization working independently.
This led to Executive Information Systems (EIS), a more refined version of the DSS system. It
allowed executives to analyze their department’s output and how it impacted the business’s overall
performance.
1990-2000: Enterprise Resource Management (ERP) Systems
Multiple information systems that were not integrated resulted in employees wasting time duplicating
information across systems. IS had to become efficient. It did that by creating Enterprise Resource
Management (ERP) systems that integrated knowledge management systems and expert systems.
Knowledge-based systems organize and disseminate business knowledge within an
organization. Example: placing a best practices resource on the intranet.
Expert systems started to use artificial intelligence to provide advice and
solutions. Example: proposing faster delivery routes or assessing risk profiles for credit
applications. For the first time, different systems were “talking” to each other.
How Is IS Changing?
IS systems are becoming more intelligent. Most of the trends below are not new but they will
continue to shape how management information systems function in the future.
1. Automation and cross-functional integration
Automation can be used for repetitive tasks and to cross-populate data with other systems. This frees
up employees’ time to focus on higher-value tasks. For example, automation can track inventory and
alert you when stocks are low or automatically reorder stocks when needed without human
intervention.
2. Big data analytics
Worldwide, around 2.5 quintillion bytes of data are being generated daily. From customers’ buying
habits to social media interactions, data is rolling in from everywhere. Information systems not only
have to cope with the influx of data, but also analyze it. The information gleaned can be used to make
operations more efficient, improve customer service, and create Funderae personalized marketing
campaigns.
3. Artificial intelligence (AI)
Artificial intelligence is making waves across almost every sector. AI has been the biggest disruptor
in business in recent years. From chatbots to self-driving cars, AI is already a part of our lives and
will continue to become more entrenched. AI technology is capable of learning patterns and
identifying anomalies when processing big data. It can detect fraud and determine the risk profile of
applicants applying for credit.
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4. Cyber security
Cybercrime is a threat every business faces. Most cyber-attacks are financially motivated. A cyber-
attack can be a fatal blow to a business. Research by shows that 60% of small businesses that
experience a cyber-attack go out of business within six months. Companies now invest heavily in
protecting their data. As cybercriminals become more sophisticated, cyber security software will have
to stay one step ahead.
TYPE BASED FUNCTION AND HIERARCHY
6 Types of Information Systems
1. Transaction Processing Systems
2. Office Automation Systems
3. Knowledge Management Systems
4. Management Information Systems
5. Decision Support Systems
6. Executive Support System
Though organizational growth is optimal for both small and large companies, it comes with many
different challenges. With expansion comes more responsibilities, strategic planning, and the need for
better communication.
As a start-up evolves from 5 employees to 200, new business units are created to handle specific
functions and optimize efficiency. Managers are required to monitor each department to ensure
everyone is meeting targets on time. The owner must track competitors who would like nothing more
than to lure away customers.
These new requirements make it essential to have an information system in place that uses artificial
intelligence to allow employees and managers to communicate, collaborate, and quickly process
transactions.
Furthermore, both an evolving and established company can benefit from using different types of
information systems that help each unit make structured decisions and enhance problem-solving
skills.
Information System Classification:
Operational Management - Includes transaction processing system, office automation system, and
knowledge management system, handles structured data, and used by workers and employees to
streamline daily operations
Tactical Management - Used by business unit managers, handles semi-structured data, and includes
management information systems
Strategic Management - Used by executives, handles unstructured data, and includes the decision
support system and executive support system

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6 Types of Information Systems
Most businesses utilize six different information technology systems, each with functionality that
assists in managing a particular business unit or organizational level. Because the business
environment has a wide range of data requirements, business intelligence technology systems help
each department manage and organize all of their data in a manner that helps unit members meet key
objectives. If the data collected by an IS is relevant and accurate, the organization can use it to
streamline tasks, pinpoint inefficiencies, and enhance customer service. Successful companies
typically employ six different systems to ensure that every aspect of the organization's data is
properly managed and used to improve decision-making and problem-solving. This allows a
company to maintain a competitive edge, find growth opportunities, and keep an accurate audit trail
of financial and transactional data for compliance purposes.
Here is an overview of the six types of information systems and how they work-
Transaction Processing System
A transaction encompasses all of the purchases and sales of products and services, along with any
daily business transactions or activities required to operate a company. Quantities and the types of
transactions performed vary, depending on the industry and size/scope of the company. Examples of
typical transactions include billing clients, bank deposits, new hire data, inventory counts, or a record
of client-customer relationship management data.
A transaction processing system ensures that all of the contractual, transactional, and customer
relationship data is stored in a safe location and accessible to everyone who needs it. It also assists in
the processing of sales order entries, payroll, shipping, sales management, or other routine
transactions needed to maintain operations.
By utilizing a TPS, organizations can have a high level of reliability and accuracy in their
user/customer data while minimizing the potential for human error.
2. Office Automation Systems
An office automation system is a network of various tools, technologies, and people required to
conduct clerical and managerial tasks. Typical examples of functions performed by an OAS include
printing documents, mailing paperwork, mailing, maintaining a company calendar, and producing
reports. Primarily, an office automation system assists in enhancing communication among different
departments so everyone can collaborate to complete a task.
An OAS can integrate with e-mail or word processing applications to ensure all communication data
is easily accessible and in one centralized location. By utilizing an office automation system,
businesses can improve communication between workers, streamline managerial activities, and
optimize knowledge management
3.Knowledge Management Systems
A knowledge management system stores and extracts information to help users enhance their
knowledge and optimize collaboration efforts to complete tasks. Examples of documents found in a
knowledge management system include employee training materials, company policies, and
procedures, or answers to customer questions. A KMS is used by employees, customers,
management, and other various stakeholders involved with the organization. It ensures that technical
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abilities are integrated throughout the company while providing visuals to help employees make
sense of the data they see. This information system also provides intuitive access to external
information required by workers who need outside knowledge to complete their roles. For example, a
KMS may hold competitor data that helps a sales team member optimize his/her strategy when
pitching to a customer.
Because a KMS shares expertise and provides answers to essential questions, using one can improve
communication among team members and assist everyone in meeting performance goals.
4. Management Information Systems
A management information system uses various transaction data from a TPS to help middle
management optimize planning and decision-making. It retrieves TPS information, aggregates it, and
generates reports to help those at the management level know important details of a
situation. Summaries and comparisons are utilized to allow senior managers to optimize the decision-
making process to achieve better results.
Most of the report formats encompass summaries of annual sales data, performance data, or historical
records. This provides a secure and systemized way for managers to meet their targets and oversee
business units.
5. Decision Support Systems
A decision support system processes data to assist in management decision-making. It stores and
gathers the information required for management to take the proper actions at the correct time. For
example, a bank manager can use a DSS to assess the evolving loan trends to determine which yearly
loan targets to meet. Decision models are programmed into the IS to analyze and summarize large
quantities of information and put it into a visual that makes it understandable.
Because a DSS is interactive, management can easily add or delete data and ask important questions.
This provides the evidence required for mid-management to make the right choices that will ensure
the company meets its targets.
6. Executive Support System
Executive support systems are similar to a DSS but are primarily used by executive leaders and
owners to optimize decision-making. An expert system helps enterprise leaders find answers to non-
routine questions so they can make choices that improve the company's outlook and performance.
Unlike a DSS, an executive support system provides better telecommunication functionality and a
bigger computing functionality.

Graphics software is integrated within an ESS to display data about tax regulations, new competitive
start-ups, internal compliance issues, and other relevant executive information. This allows leaders to
track internal performance, monitor the competition, and pinpoint growth opportunities.
Specific Use Cases for Information Systems:
Enterprise Resource Planning - Provides organization-wide integration of important business
activities, handles the allocation of resources to optimize efficiency

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Accounting Information System - Manages all of the accounting information in an organization,
including payroll to streamline human resource tasks
Sales Management System - An information system that manages and monitors all of the sales and
marketing data in an organization to streamline each step of the processes.

ENTERPRISE AND FUNCTION INFORMATION SYSTEM

Enterprise Information System (EIS)
An enterprise information system (EIS) is any kind of information system which improves the
functions of an enterprise business processes by integration. This means typically offering
high quality of service, dealing with large volumes of data and capable of supporting some large and
possibly complex organization or enterprise. An EIS is capable being used by all parts and all levels
of an enterprise. The word enterprise can have various connotations. Frequently the term is used only
to refer to very large organizations such as multi-national companies or public sector organizations.
However, the term may be used to mean virtually anything, by virtue of it having become the latest
corporate-speak buzzword. Enterprise information systems provide a technological platform that
enables organizations to integrate and coordinate their business processes on a robust foundation. An
EIS is currently used in conjunction with customer relationship management and supply chain
management systems to automate business processes. An enterprise information system provides a
single system that is central to the organization that ensures information can be shared across all
functional levels and management hierarchies. An EIS can be used to increase
business productivity and reduce service cycles, product development cycles and marketing life
cycles. It may be used to amalgamate existing applications. Other outcomes include higher
operational and cost savings. Financial value is not usually a direct outcome from the implementation
of an enterprise information system.
Design stage
At the design stage the main characteristic of EIS efficiency evaluation is the probability of timely
delivery of various messages such as command, service, multimedia files, etc. Enterprise systems
create a standard data structure and are invaluable in eliminating the problem of information
fragmentation caused by multiple information systems within an organization. An EIS differentiates
itself from legacy systems in that it self-transactional, self-helping and adaptable to general and
specialist conditions. Unlike an enterprise information system, legacy systems are limited to
department wide communications. A typical enterprise information system would be housed in one or
more data centre’s, would run enterprise software and could include applications that typically cross
organizational borders such as content management systems.
Enterprise systems create a standard data structure and are invaluable in eliminating the problem of
information fragmentation caused by multiple information systems within an organization. An EIS
differentiates itself from legacy systems in that it is self-transactional, self-helping and adaptable to
general and specialist conditions. Unlike an enterprise information system, legacy systems are limited
to department-wide communications. A typical enterprise information system would be housed in one

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or more data centre’s, would run enterprise software, and could include applications that typically
cross organizational borders such as content management systems.
Enterprise information systems include enterprise resource planning systems (ERPs), relational
databases and mainframe transaction processing systems.
Enterprise Information System (EIS) Functions
Enterprise information systems have both operational (transaction-processing) and informational
(data storage, retrieval, and reporting) functions.
The operational goals tend to be focused on efficiency. When done well, enterprise information
systems make it easier for people to complete their work in a timely and accurate manner. They also
enable the university to standardize and streamline its operations. By contrast, poor quality enterprise
systems can actually increase workloads, lead to frustration among the people who use them, and
cause costly operational disruptions.
The informational goals of enterprise systems focus on effectiveness. Institutional data needs to be
readily available to decision-makers in a form that marries data with context. The quality of the
information is more important than the quantity of data.

New concept of EIS

Recent trends in the development of enterprise information systems are associated with the intention
to use information generated within the company, in the external environment to ensure cooperation
with other enterprises, customers and partners. Here we take into account the new concept of Enterprise
Information System: the emphasis is placed on the EIS which is opened for the all partners operating
in common business interests instead of on traditional internal business process management
optimization.
This concept includes five new tendencies:
Change the role of ERP system. Automation the internal business processes as well as external,
counteragent relationships: customers, suppliers, banks, tax authorities;
The system technologies move towards an openness and transparency. Internal processes are
becoming more open. Information and data about activity of an enterprise can be available for
business society member.
Use of Web-technologies.
Structural changes of system architecture. Instead of closed monolithic platform – open multilevel
applications built on concepts of service-oriented architecture (SOA). Use E-SOA; Expansion of
system implementation. Adaptation for enterprises of different kinds and sizes; Deepen the system
functionality. All enterprise business processes should be automated;

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Enterprise Information System (EIS) Categories
Enterprise Information systems are divided into several categories, each of them occupies a niche in
the production life cycle of the enterprise
ERP (Enterprise Resource Planning) - System for planning (managing) enterprise resources.
CRM (Customer Relationship Management) - interaction model, which is based on the assumption
that the centre of all business philosophy is the client and the main activities are effective marketing,
sales and customer service.
ECM (Enterprise Content Management) - a strategic infrastructure and technical architecture to
support a single life cycle of unstructured data (content) of various types and formats. Primarily used
to capture, manage, store, preserve, and deliver content.
CPM (Corporate Performance Management) - corporate performance management concept, which
covers the whole range of tasks in the area of strategic and financial administration of the company. It
is the process of monitoring and managing an organization's performance, according to key
performance indicators.
HRM (Human Resource Management) - the field of knowledge and practices, aimed at ensuring the
staff organization and its optimal use. HR is primarily concerned with the organization of people
resources within companies.
EAM (Enterprise Asset Management) - is an information system designed primarily for the
automation of processes related to the maintenance of the equipment, its repair and after-sales
service. It is the optimal life cycle management of the physical assets in organization.

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EDMS (Electronic Document Management System) - enterprise document management framework.
It is a software complex based on computer programs used to track, manage and store documents.
Usually has the client-server architecture.

Characteristics and Benefits of Enterprise Information System (EIS)[7]

The characteristics and Benefits of Enterprise Information System (EIS) are illustrated in Table 8.2
below:

Systems Theory and Systems Thinking in Enterprise Information Systems (EIS)

System thinking provides an important insight into the role of information systems plays in the
process from data to knowledge. Information systems are not created for their own sake. They serve
or support users engaged in what for them is meaningful action. When one system is thought of as
serving another, it is a fundamental principle of systems thinking that should be thought carefully
about, it is primary to define carefully the nature of the system served. Information System is a
comprehensive concept which is far more substantial than the original phrase “data processing
system”, which adequately expressed the nature of computing only in the days of transaction
processing. Indeed, an “enterprise information system” is a “knowledge attribution system” in which
people select certain data, get them processed and make them meaningful in enterprise context alike
to support people engaged in purposeful action. Therefore, one crucial factor of successful EIS is to
govern people purposed actions in EIS development and implementation.
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System theories focus problems on the relationship between parts and the whole. For a corporation or
an organization, departments and business units or service providers are the parts and itself is the
whole. For a supply chain or virtual enterprise, all the companies or collaboration units embedded in
are the parts, while the whole enterprise is a whole. Every system is composed of separate parts, but
the function of a system cannot simply achieved by the sum of functions provided by each part or
subsystems. Consequently, the whole enterprise system can accomplish certain function while the
parts of it cannot, which is called the whole affectivity in enterprise systems. From systems theory,
synthesis of EIS with enterprise scope has two fundamental facets:
It means synthesis inside the enterprise itself. The scale of synthesis covers businesses between each
department, the restrictions between each resource, and so on. All of these need some tools to
cooperate and unite.
It also means the internal and external synthesis of enterprise in supply chain or global marketplace,
such as the synthesis among users’ requirements, supplies, purchases and transactions.
A Conceptual Model for Enterprise Information System Security
“Information Security Policy is not an option, it’s demanded from the top of the house on down, its
board approved, accepted by regulators, and executed throughout the organization. ” The Conceptual
Model for Enterprise Architecture was presented to Information Security Officers at a Bank who
confirmed the the importance of all the main issues proposed in the conceptual model.

1.Security Policy
• Set rules for behaviour
• Define consequences of violations
• Procedure for dealing with breach
• Authorize company to monitor and investigate
• Legal and regulatory compliance
2.Security Awareness
• Continued education
• Collective and individual activities
• Formal classes, emails, discussion groups
• Employee compliance

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3.Access Control
• Limit information
• Access linked to job function
• Restrict information not relevant to position
• Management of access rule changes
4.Top level management support (TLMS)
• Transparent support for policies and procedures
• Ingrain information security into company culture
• Effective communications

Functional Information Systems

Functional Information System is based on the various business functions such as Production,
Marketing, Finance and Personnel etc. These departments or functions are known as functional areas
of business. Each functional area requires applications to perform all information processing related
to the function. The popular functional areas of the business organization are:
Financial Information System
Marketing Information System
Production/Marketing Information System
Human Resource Information System
(i) Financial Information System
Financial information system is a sub-system of organizational management information system. This
sub-system supports the decision-making process of financial functions at the level of an
organization.
(ii) Marketing Information System
This sub-system of management information system provides information about various functions of
the marketing system of an organization. Marketing is another functional area of the business
organization, which is engaged in marketing (selling) of its products to its customers.
Important functions of the marketing process include the following.
• The marketing identification function
• The purchase motivation function
• The product adjustment function
• The physical distribution function
• The communication function
• The transaction function
• The post-transaction function

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(iii) Production /manufacturing Information System
Manufacturing or production information system provides information on production /operation
activities of an organization and thus facilitates the decision-making process of production managers
of an organization. The main decisions to be taken in manufacturing system is Product Design
(iv) Human Resources Information System
This functional information system supports the functions of human resource management of an
organization. The human resource management function, in its narrow sense, it also known as
personnel management. The function involves:
• Manpower planning
• Staffing
• Training and development
• Performance evaluation, and
• Separation activities
Characteristics of Functional Information System
Equipment Requirements of Functional Information System

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