Chapter 8. Generic types of information systems. Databases. Matthew Hinton

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1 Chapter 8 Generic types of information systems Matthew Hinton An information system collects, processes, stores, analyses and disseminates information for a specific purpose. At its simplest level, an information system processes a set of inputs (like data and instructions) and produces a variety of outputs (like reports and calculations) within a given environment. This chapter sets out to explore the generic types of information systems that are used for storing and processing information. To begin with, it describes the important role played by databases, as arguably the single most significant component in most information systems. This is followed by a breakdown of the generic types of information systems that can be identified in virtually all organizations. System classifications are derived from their various attributes, such as organizational purpose and value, and the nature of the business processes they support. bases bases are the most widespread form of information store and are commonly employed throughout organizations. As such, they often form the building blocks of management information systems. Essential to the idea of a management information system is the ability to retrieve data and use them for the production of targeted information for management decision making. Much data will be created and stored as a result of the ongoing processes and transactions taking place within an organization. This activity takes place regardless of the type, size or industry sector the organization finds itself in. The commercial operation of a retail store will produce data every time goods are delivered, staff employed to place stock on shelves, or groceries paid for by customers. In the same way a public service like a hospital will generate data which show its transactions ; how many patients on a waiting list, the allocation of key resources like an operating theatre or the stock of medical supplies. It is important that such

2 102 Information management in context data are seen as a central resource for the entire management information system and not solely connected to the application that produced it:... Sales transaction data used to update the sales ledger will be stored after the updating process. This data should be available for other purposes. It can be used to provide reports on sales personnel performance as part of the HR management function. Alternatively, it can be fed into models that use data and information from other sources to forecast cash flows and aid cash management. Curtis and Cobham, 1998, p. 25 In order for data to be commonly available, special software, known as the database management system, is required to control access to the various data stores. Figure 8.1 shows how the ongoing organizational processes are fed into the database and the data are passed on to managers via the database management system. Managers may make direct enquiries of the database or, more commonly, some form of management information system will process data as required. Model Information Information Application software Information by direct enquiry base Transaction data Materials energy Labour power base management system Transaction data processing Materials processing Report information Product /information Materials Figure 8.1 The provision of information from a database Access to accurate and timely information needed for decision making has become increasingly important for modern organizations. Unfortunately, it has not always been easy to identify and retrieve the required information. Organizations have accumulated vast database systems containing gigantic volumes of data, so the emphasis has shifted to efficient organization and access management of this resource. The focus of technology has changed from simple data input and capture to information access and availability

3 Chapter 8 Generic types of information systems 103 provided by an organization s data warehouse. A data warehouse is a relational or multidimensional database management system designed to support decision making (Turban et al., 2001). The data warehouse transforms data into a more useful resource by grouping them more conveniently for users, standardizing data formats to enable better data analysis and increase the availability and accessibility of data to appropriate working groups. The intelligent management of data in many different databases, using a data warehouse, has many business advantages. These include: l removing barriers among functional areas, thus providing a look at cross-functional activities l consolidating data about individual customers l providing users with an integrated, customer-centric view of the organization s data, compiled from data in different systems l providing added value to customers by allowing them to access better information when data warehousing is coupled with communications technologies such as the Internet. Types of information systems Business information systems are designed to produce information that is of value to the organization. So that the user organization can be persuaded to invest money in this type of undertaking they must be persuaded of the value of the information produced. The value of this information is in turn dependent on the purpose of the information. For example, the system may produce information that enables the user to keep control of the organization s payroll or enables management to make better decisions so giving the organization a competitive edge. In terms of business objectives, information systems fall into three major categories: operational, tactical and strategic (see Figure 8.1). Operational systems Information systems of this type concern those operations carried out by the organization in its normal trading environment. These systems perform necessary routine activities and include applications such as stock control, order processing, retailing systems, on-line booking systems and so on. Operational systems can be unexceptional but they are usually critical to the organization s endeavours (Cleary, 1998). Tactical systems Tactical systems are usually associated with those processes that supply information for immediate decision making. Such decisions usually refer to management activities involved with the monitoring of financial budgets,

4 104 Information management in context pricing levels, human resourcing, production schedules, stock level planning and so on. Strategic systems Strategic systems are invariably concerned with those decisions that affect the long-term policy objectives of the organization. Such decisions usually regard matters like determining the types of products/services supplied by the organization, the organization s centre of activities, investment plans in research and development and issues concerning the financing of the enterprise. Information systems Support of strategic advantage Support of managerial decision making Support of business operations Figure 8.2 Major roles of information systems Strategic systems frequently depend on information sources that are usually beyond the influence of the individual organization. For example, borrowing requirements and export policies could depend upon national factors such as interest rates and levels of unemployment, or international factors such as currency exchange rates or commodity prices. So useful models such as sophisticated spreadsheet scenarios incorporating data of this type have enabled users to make better decisions than might otherwise have been the case (Cleary, 1998). So information systems perform three vital roles in any type of organization: l l l support of its business processes and operations support of decision making by its employees and managers support of its strategies for competitive advantage. The categorization of information systems is a matter of debate. Indeed some regard it as a fruitless debate since change is so rapid, but it can be helpful to sort information systems into levels according to use. With this in

5 Chapter 8 Generic types of information systems 105 mind, O Brien (2000) offers a classification of information systems that distinguishes between operational and management support systems (see Box 8.1). Box 8.1 Classification of system roles Operational support systems Information systems have always been needed to process data generated by, and used in, business operations. Such operational support systems provide a variety of information products for internal and external use. However, they do not emphasize producing specific information products that can be best used by managers. Further processing by management information systems is required. The role of an organization s operational support systems is to efficiently process business transactions, control industrial process, support enterprise communications and collaboration. Transaction processing systems are an important example of operational support systems that record and process data resulting from business transactions. For example, point of sale systems at many retail stores use electronic cash register terminals to electronically capture and transmit sales data over telecommunication links to regional computer centres for processing. Process control systems monitor and control physical processes. For example, a petroleum refinery uses information systems to monitor chemical processes and make instant adjustments that control the refining process. Enterprise collaboration systems enhance group-working activity. For example, a project team may use electronic mail to send and receive messages and to coordinate their activities. Management support systems When information systems focus on providing information and support for effective decision making by managers, they are called management support systems. Conceptually, several types of information system support a variety of managerial responsibilities. Management Information Systems (MIS) provide information in the form of reports and displays for managers. For example, sales managers may use their personal computers to get displays about sales results of their products and to access sales reports evaluating sales made by each salesperson. Decision Support Systems give direct computer support to managers during the decision-making process. For example, advertising managers may use an electronic spreadsheet package to do sensitivity analysis to test the impact of alternative advertising budgets on forecasted sales. Executive Information Systems provide critical information in easy to use displays. For example, top executives may use touchscreen terminals to instantly view text and graphics displays that highlight key areas of organizational performance (O Brien (2000), pp ).

6 106 Information management in context As mentioned above, the term Decision Support Systems (DSS) covers any computerized system that supports decision-making activity. A DSS is intended to support rather than replace decision-making roles. Computerized systems can replace the human decision maker in structured decisions but are of little help in completely unstructured situations. In addition, decision makers encounter a variety of decisions which comprise a structured element, where data are transformed, and an unstructured nonrule-governed element. It is just these decisions that can be aided by DSS (Curtis and Cobham, 1998). Many decisions taken within an organization will be taken not by a single individual but as a result of group deliberations. Group decision support systems (GDSS) deliver computerbased support for group decisions. Given their purpose, decision support systems require flexible interactive access to data. In addition, DSS are designed with an understanding of the requirements of the decision makers and the decision-making process in mind. This has implications, two of the most important being: 1 Flexible access to data: many semi-structured decisions are only possible if the decision maker has immediate access to ad hoc data retrieval and report generation facilities. For internal decisions this means that access by powerful query languages of existing data held in a corporate database is required. 2 The need for interactive support: typically many of the semi-structured decisions for which DSS are relevant involve the decision maker in asking questions that require immediate answers. As a result of this, further interrogation is made. Examples are: Sensitivity analysis (sometimes called what if? analysis) as in what would the effect on profits be if we were to be subject to a 5 per cent material cost rise? Goal seeking as in what would be the required mix in the liquidation of short-term and medium-term assets to reduce a projected cash deficit to zero over the next six months? Optimization as in how do we ensure optimum utilization of our machines? The development of artificial intelligence techniques has given rise to two final categories of information system you will encounter in organizations: Expert Systems and Knowledge Management Systems. An expert system is a knowledge-based information system that uses its knowledge about a specific, complex application area to act as an expert consultant to decision makers and other system users. As O Brien (2000) explains, Expert systems provide answers to questions in a very specific problem area by making human like inferences about knowledge contained in a specialized knowledge base. They must also be able to explain their reasoning process and conclusions to a user (Egan, 1995). The major limitations of expert systems are the result of their limited focus and inability to learn. So expert

7 Chapter 8 Generic types of information systems 107 systems excel only in solving specific types of problems in a limited domain of knowledge. They fail where a broad range of knowledge is needed to solve a problem and are weak when dealing with subjective managerial decision making. References Cleary, T. (1998) Business Information Technology, FT Prentice-Hall. Curtis, G. and Cobham, D. (1998) Business Information Systems: analysis, design and practice, Addison Wesley Longman. Egan, R. (1995) The expert within. PC Today, January. O Brien, J. (2000) Introduction to Information Systems, McGraw-Hill. Turban, E., Rainer, R. and Potter, R. (2001) Introduction to Information Technology, Wiley and Sons.