An information system (IS) is any combination of information technology and people's activities
using that technology to support operations, management, and decision-making. In a very broad
sense, the term information system is frequently used to refer to the interaction between people,
algorithmic processes, data and technology. In this sense, the term is used to refer not only to the
information and communication technology (ICT) an organization uses, but also to the way in
which people interact with this technology in support of business processes
Classification and brief history:
Characterized by a principal technology used to solve the input, processing, output and
communication problems of the time:
C. Electromechanical, and
A. The Premechanical Age: 3000 B.C. - 1450 A.D.
1. Writing and Alphabets--communication.
First humans communicated only through speaking and picture drawings.
2. Paper and Pens--input technologies.
Sumerians' input technology was a stylus that could scratch marks in wet clay.
3. Books and Libraries: Permanent Storage Devices.
Religious leaders in Mesopotamia kept the earliest "books"
4. The First Numbering Systems.
1. Egyptian system:
The numbers 1-9 as vertical lines, the number 10 as a U or circle, the
number 100 as a coiled rope, and the number 1,000 as a lotus blossom.
The First Calculators: The Abacus.
B. The Mechanical Age: 1450 - 1840
1. The First Information Explosion.
1. Johann Gutenberg (Mainz, Germany)
Invented the movable metal-type printing process in 1450.
2. The development of book indexes and the widespread use of page numbers.
2. The first general purpose "computers"
o Actually people who held the job title "computer: one who works with numbers."
Slide Rules, the Pascaline and Leibniz's Machine.
C. The Electromechanical Age: 1840 - 1940.
The discovery of ways to harness electricity was the key advance made during this period.
Knowledge and information could now be converted into electrical impulses.
1. The Beginnings of Telecommunication.
1. Voltaic Battery.
Late 18th century.
3. Morse Code.
Developed in1835 by Samuel Morse
Dots and dashes.
4. Telephone and Radio.
1876 Alexander Graham Bell.
2. Electromechanical Computing
1. Herman Hollerith and IBM.
Herman Hollerith (1860-1929) in 1880
Early punch cards.
D. The Electronic Age: 1940 - Present.
1. The First Generation (1951-1958).
1. Vacuum tubes as their main logic elements.
2. Punch cards to input and externally store data.
3. Rotating magnetic drums for internal storage of data and programs
Programs written in
Requires a compiler
2. The Second Generation (1959-1963).
0. Vacuum tubes replaced by transistors as main logic element.
AT&T's Bell Laboratories, in the 1940s
Crystalline mineral materials called semiconductors could be used
in the design of a device called a transistor
3. The Third Generation (1964-1979).
0. Individual transistors were replaced by integrated circuits.
1. Magnetic tape and disks completely replace punch cards as external
2. Magnetic core internal memories began to give way to a new form, metal
oxide semiconductor (MOS) memory, which, like integrated circuits, used
Advanced programming languages like BASIC developed.
Which is where Bill Gates and Microsoft got their start in
4. The Fourth Generation (1979- Present).
It can be provide GUI as well as latest communication methods and technology
through which communication is very fast and effective.
Types of Information systems:
Information systems are constantly changing and evolving as technology continues to grow.
Very importantly the information systems described below are not mutually exclusive and some
(especially Expert Systems, Management Information Systems and Executive Information
Systems are can be seen as a subset of Decision Support Systems). However these examples are
not the only overlaps and the divions of these information systems will change over time.
At present there are five main types:
A. Transaction Processing System:
A transactionprocessingsystem(TPS) collects,stores,modifiesandretrievesthe transactionsof
an organization.Examplesof suchsystemsare automatictellingmachines(ATMs),electronic
fundstransferat pointof sale (EFTPOS – alsoreferredtoas POS).
• A TransactionProcessingSystemcollects,stores,modify'sandretrievesthe daily
transactionsof a business.
• TPSsystemssecure andrecordthe dailytransactionsof a company.
There are two typesof transaction ofprocessing:
Batch processing:where all of the transactionsare collectedandprocessedasone groupor
batch at a later stage.
Real-time processing:where the transactionisprocessedimmediately
A. Transaction Processing Systems (TPS)
B. Decision Support Systems (DSS)
C. Expert Information Systems (EIS)
D. Management Information Systems (MIS
E. Office Automation Systems (OAS)
B. Decision Support Systems:
A decision support systems (DSS) is a computer-based information system that supports business
or organizational decision-making activities. DSSs serve the management, operations, and
planning levels of an organization and help to make decisions, which may be rapidly changing
and not easily specified in advance.
DSSs include knowledge-based systems. A properly designed DSS is an interactive software-
based system intended to help decision makers compile useful information from a combination
of raw data, documents, personal knowledge, or business models to identify and solve problems
and make decisions.
Typical information that a decision support application might gather and present are:
inventories of information assets (including legacy and relational data sources, cubes,
data warehouses, and data marts),
comparative sales figures between one period and the next,
projected revenue figures based on product sales assumptions.
C. Expert Information Systems (EIS):
• Expert systems are computer programs that capture the knowledge of a human expert and
use it to solve complex problems.
• Knowledge appears in different forms in an organization such as an innovative ideas for a
products, a new way to motivate employees, a new production method…..
• The main goal of ES is to capture knowledge of experts in all forms and use it to solve
complex problems of an organization in a relatively narrow domain.
• ES then are versatile and can help with many kinds of problems.
• It attempts to represent knowledge of human experts in the form of heuristics.
D. Management Information Systems:
A management information system (MIS) is a system or process that provides information
needed to manage organizations effectively. Management information systems are regarded to be
a subset of the overall internal controls procedures in a business, which cover the application of
people, documents, technologies, and procedures used by management accountants to solve
business problems such as costing a product, service or a business-wide strategy. Management
information systems are distinct from regular information systems in that they are used to
analyze other information systems applied in operational activities in the organization.
E. Offics Automation system:
Office automation refers to the varied computer machinery and software used to digitally create,
collect, store, manipulate, and relay office information needed for accomplishing basic tasks and
goals. Raw data storage, electronic transfer, and the management of electronic business
information comprise the basic activities of an office automation system. Office automation
helps in optimizing or automating existing office procedures.
The backbone of office automation is a LAN, which allows users to transmit data, mail and even
voice across the network. All office functions, including dictation, typing, filing, copying, fax,
Telex, microfilm and records management, telephone and telephone switchboard operations, fall
into this category. Office automation was a popular term in the 1970s and 1980s as the desktop
computer exploded onto the scene
Role of information technology in information system
Information Technology (IT) also known as Information and Communication(s) Technology (ICT) and
Infocomm (in Asia) is concerned with the use of technology in managing and processing information,
especially in large organizations. In particular, IT deals with the use of electronic computers and computer
software to convert, store, protect, process, transmit, and retrieve information.
Hardware and Software Integration:
An organization can have several different computer platforms (hardware and software). A
system can process, store and distribute information if integrated into the workflow of an
information system. For example, a local area network (LAN) can integrate into a mainframe
system that processes accounting information through a concept called a "gateway." An open
architecture information system allows for integration at all levels throughout an organization.
Support of a Multi-Processing Environment:
An information system can support a "real-time" multi-processing environment through the
concept of "time-sharing application." These features are important to an organization that
process transactions while developing and testing program applications. In a multi-processing
environment, various departments, divisions or branches can have access to the system at the
same time intervals.
The layout of an information system is partitioned according to data security policies, user access
and program applications. The partitioning of the physical hard drives, memory and storage
space related to software applications creates system balance and effective use of the system
Central Processing Unit (CPU).
Provides Data for Decision Support:
The most important role of an information system in an organization is to provide data to help
executive management make decisions. Data is compiled through transaction processing or query
routines built into the information system to access item and detail records. These results are
defined in the organizations' objectives and goals to improve productivity.
Automation of Manual Tasks
Information systems architecture can assist an organization in automating manual tasks.
Automation can save time, money and enhance organizational workflow. There are various types
of information systems such as health and medical services to logistical information systems
automated warehouses and distribution systems).
Role of ISs in Business Functions
First we have to be clear what exactly the business functions are…
Series of logically related activities or tasks (such as planning, production, sales) performed
together to produce a defined set of results, also called business processes.
There are three types of business processes/functions:
1. Management processes
The processes that govern the operation of a system. Typical management
processes include "Corporate Governance" and "Strategic Management".
2. Operational processes
Processes that constitute the core business and create the primary value stream.
Typical operational processes are Purchasing, Manufacturing, Advertising and
Marketing, and Sales.
3. Supporting processes
Which support the core processes, Examples include Accounting, Recruitment,
Call center, Technical support.
A business process begins with a mission objective and ends with achievement of the
business objective. Process-oriented organizations break down the barriers of structural
departments and try to avoid functional silos.
Supporting Business Functions in an Enterprise with Information
The principal business functions in a business firm are:
1. Marketing and sales
3. Accounting and finance
4. Human resources
1. Marketing Information Systems
Marketing activities are directed toward planning, promoting, and selling goods and services to
satisfy the needs of customers and the objectives of the organization.
Marketing information systems support decision making regarding the marketing mix.The
marketing mix subsystems support decision making regarding product introduction, pricing,
promotion (advertising and personal selling), and distribution. These decisions are integrated into
the sales forecast and marketing plans against which the ongoing sales results are compared.
Marketing mix subsystems include:
1.1. Product subsystem
1.2. Place subsystem
1.3. Promotion subsystem
1.4. Price subsystem
The product subsystem helps to plan the introduction of new products.
Continually bringing new products to market is vital in today's competitive environment
of rapid change. The product subsystem should support balancing the degree of risk in
the overall new-product portfolio, with more aggressive competitors assuming higher
degrees of risk for a potentially higher payoff.
Although decisions regarding the introduction of new products are unstructured,
information systems support this process in several ways:
a) Professional support systems assist designers in their knowledge work
b) DSSs are used to evaluate proposed new products
c) With a DSS, a marketing manager can score the desirability of a new
d) Electronic meeting systems help bring the expertise of people dispersed in
space and time to bear on the problem
1.2 Place Subsystem
The place subsystem assists the decision makers in making the product available to
the customer at the right place at the right time. The place subsystem helps plan the
distribution channels for the product and track their performance.
The use of information technology has dramatically increased the availability of
information on product movement in the distribution channel. Examples include:
a) Bar-coded Universal Product Code (UPC)
b) Point-of-sale (POS) scanning
c) Electronic data interchange (EDI)
d) Supports just-in-time product delivery and customized delivery
1.3 Promotion Subsystem
The promotion subsystem is often the most elaborate in the marketing information
system, since it supports both personal selling and advertising. The role of
telemarketing, marketing over the telephone, has increased. Telemarketing calls are well
supported by information technology. Sales management is thoroughly supported with
information technology. Customer profitability analysis help identify high-profit and
1.4 Price Subsystem
Pricing decisions find a degree of support from DSSs and access to databases that
contain industry prices. These highly unstructured decisions are made in pursuit of the
company’s pricing objectives. General strategies range from profit maximization to
forgoing a part of the profit in order to increase a market share.
2. Production or Manufacturing Information Systems
Global competitive pressures of the information society have been highly pronounced in
manufacturing and have radically changed it. The new marketplace calls for manufacturing that
1. Lean - highly efficient, using fewer input resources in production through better engineering
and through production processes that rely on low inventories and result in less waste.
2. Agile - fit for time-based competition. Both the new product design and order fulfillment are
Structure of Manufacturing Information Systems
Information technology must play a vital role in the design and manufacturing processes.
Manufacturing information systems are among the most difficult both to develop and to
TPSs are embedded in the production process or in other company processes. The data provided
by the transaction processing systems are used by management support subsystems, which are
tightly integrated and interdependent.
Manufacturing information subsystems include:
a. Product design and engineering
b. Product scheduling
c. Quality control
d. Facilities planning, production costing, logistics and inventory subsystems
Product Designand Engineering
Product design and engineering are widely supported today by computer-aided design (CAD)
and computer-aided engineering (CAE) systems. CAD systems assist the designer with
automatic calculations and display of surfaces while storing the design information in databases.
The produced designs are subject to processing with CAE systems to ensure their quality, safety,
manufacturability, and cost-effectiveness. CAD/CAE systems increasingly eliminate paperwork
from the design process, while speeding up the process itself. As well, the combined techniques
of CAD/CAE and rapid prototyping cut time to market.
Production scheduling is the heart of the manufacturing information system. This complex
subsystem has to ensure that an appropriate combination of human, machinery, and material
resources will be provided at an appropriate time in order to manufacture the goods.
Production scheduling and the ancillary processes are today frequently controlled with a
manufacturing resource planning system as the main informational tool. This elaborate
software converts the sales forecast for the plants products into a detailed production plan and
further into a master schedule of production.
Computer integrated manufacturing (CIM):
It is a strategy through which a manufacturer takes control of the entire manufacturing process.
The process starts with CAD and CAE and continues on the factory floor where robots and
numerically controlled machinery are installed - and thus computer-aided manufacturing
(CAM) is implemented.
The quality control subsystem of a manufacturing information system relies on the data collected
on the shop floor by the sensors embedded in the process control systems.
Total quality management (TQM) is a management technique for continuously improving the
performance of all members and units of a firm to ensure customer satisfaction.
3. Accounting and Finance
The financial function of the enterprise consists in taking stock of the flows of money and other
assets into and out of an organization, ensuring that its available resources are properly used and
that the organization is financially fit. The components of the accounting system include:
a) Accounts receivable records
b) Accounts payable records
c) Payroll records
d) Inventory control records
e) General ledgers
Financial information systems rely on external sources, such as on-line databases and custom
produced reports, particularly in the areas of financial forecasting and funds management. The
essential functions that financial information systems perform include:
3.1. Financial forecasting and planning
3.2. Financial control
3.3. Funds management
3.4. Internal auditing
3.1 Financial Forecasting
Financial forecasting is the process of predicting the inflows of funds into the company and the
outflows of funds from it for a long term into the future. Outflows of funds must be balanced
over the long term with the inflows. With the globalization of business, the function of financial
forecasting has become more complex, since the activities in multiple national markets have to
be consolidated, taking into consideration the vagaries of multiple national currencies. Scenario
analysis is frequently employed in order to prepare the firm for various contingencies.
Financial forecasts are based on computerized models known as cash-flow models. They range
from rather simple spreadsheet templates to sophisticated models developed for the given
industry and customized for the firm or, in the case of large corporations to specify modeling of
their financial operations. Financial forecasting serves to identify the need for funds and their
3.2 Financial Control
The primary tools of financial control are budgets. A budget specifies the resources committed
to a plan for a given project or time period. Fixed budgets are independent of the level of activity
of the unit for which the budget is drawn up. Flexible budgets commit resources depending on
the level of activity.
Spreadsheet programs are the main budgeting tools. Spreadsheets are the personal productivity
tools in use today in budget preparation. Financial ratios indicating the performance of the
business unit. A widely employed financial ratio is return on investment (ROI). ROS shows
how well a business unit uses its resources. Its value is obtained by dividing the earnings of the
business unit by its total assets.
Financial information systems help to manage the organization's liquid assets, such as cash or
securities, for high yields with the lowest degree of loss risk. Some firms deploy computerized
systems to manage their securities portfolios and automatically generate buy or sell orders.
The audit function provides an independent appraisal of an organization's accounting, financial,
and operational procedures and information. All large firms have internal auditors, answerable
only to the audit committee of the board of directors. The staff of the chief financial officer of
the company performs financial and operational audits. During a financial audit, an appraisal is
made of the reliability and integrity of the company's financial information and of the means
used to process it.
4. Human Resource Information Systems
A human resource information system (HRIS) supports the human resources function of an
organization with information. The name of this function reflects the recognition that people who
work in a firm are frequently its most valuable resources. The complexity of human resource
management has grown immensely over recent years, primary due to the need to conform to new
laws and regulations.
A HRIS has to ensure the appropriate degree of access to a great variety of internal stakeholders,
1. The employees of the Human Resources department in performance of their duties
2. All the employees of the firm wishing ti inspect their own records
3. All the employees of the firm seeking information regarding open positions or available
4. Employees availing themselves of the computer-assisted training and evaluation opportunities
5. Managers throughout the firm in the process of evaluating their subordinates and making
6. Corporate executives involved in tactical and strategic planning and control
Information Subsystems for Human Resource Management
The information subsystems of HRIS reflect the flow of human resources through the firm, from
planning and recruitment to termination. A sophisticated HRIS includes the following
1. Human resource planning
2. Recruiting and workforce management
Human Resource Planning
To identify the human resources necessary to accomplish the long-term objectives of a firm, we
need to project the skills, knowledge, and experience of the future employees.
Recruiting and Workforce Management
Based on the long-term resource plan, a recruitment plan is developed. The plan lists the
currently unfilled positions and those expected to become vacant due to turnover.
Integrating Functional Systems for Superior Organizational Performance
Functional information systems rarely stand alone. This reflects the fact that the functions they
support should, as much as possible, connect with each other seamlessly in order to serve the
firms customers. Customers expect timely order delivery, often on a just-in-time schedule;
quality inspection to their own standards; flexible credit terms; post-delivery service; and often,
participation in the product design process.
Information technology provides vital support for integrating internal business processes, cutting
across functional lines, and for integrating operations with the firm's business partners, its
customers and suppliers.