Executive information system


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Executive information system

  1. 1. Executive Information System Introduction An Executive Information System (EIS) is a computer-based system intended to facilitate and support the information and decision making needs of senior executives by providing easy access to both internal and external information relevant to meeting the strategic goals of the organization. It is commonly considered as a specialized form of Decision Support System (DSS). The emphasis of EIS is on graphical displays and easy-to-use user interfaces. They offer strong reporting and drill-down capabilities. In general, EIS are enterprise-wide DSS that help top-level executives analyze, compare, and highlight trends in important variables so that they can monitor performance and identify opportunities and problems. EIS and data warehousing technologies are converging in the marketplace. One of the roles associated with the job of a manager involves taking decisions. The scope can vary, depending on the manager's position within the organisation. At the higher levels of the organisational management hierarchy are executives. These are managers, with a status of formal authority and responsibility over the whole of an organisation, or one of its functional units. Decisions which executives have to take are therefore particularly important since they primarily affect the long term future of the whole of the organisation. In order to carry out their jobs effectively, executives base their decisions on accurate, timely, reliable, information relevant to the variables involved in the decision. Computers have been used to implement information systems to support the management function. Approaches to satisfy the information needs of managers have led to the development of computerised systems in the form of Management Information Systems (MIS) and later Decision Support Systems (DSS). However, despite their relative superiority over non-computerised systems, and the relative success with middle-
  2. 2. management, these systems failed to satisfy the needs of senior executives. One of the main causes of this failure is best summed by the term 'information overload'. Computerised systems operated by other people did not provide the necessary support to executive managers. An alternative to the traditional reliance on subordinates for the supply of information was the development of information systems used directly by executives. The result was the emergence of Executive Information Systems (EISs). Since the term was first introduced in 1982, the trend of senior managers having direct access to computers has grown. With the increasing need for information at a strategic level, the importance of EISs is increasing. An indication of this, is the large expenditure on EISs development projects and the subsequent operation of such systems. Initially, only large organisations could afford having an EIS. However, as EISs building blocks become cheaper, this type of system gradually becomes affordable for a larger number of organisations. However despite the decreasing prices development costs of an Executive Information System are still relatively high. Decision Support Systems Abbreviated DSS, the term refers to an interactive computerized system that gathers and presents data from a wide range of sources, typically for business purposes. DSS applications are systems and subsystems that help people make decisions based on data that is culled from a wide range of sources. For example: a national on-line book seller wants to begin selling its products internationally but first needs to determine if that will be a wise business decision. The vendor can use a DSS to gather information from its own resources (using a tool such as OLAP) to determine if the company has the ability or potential ability to expand its business and also from external resources, such as industry data, to determine if there is indeed a demand to meet. The DSS will collect and analyze the data and then present it in
  3. 3. a way that can be interpreted by humans. Some decision support systems come very close to acting as artificial intelligence agents. DSS applications are not single information resources, such as a database or a program that graphically represents sales figures, but the combination of integrated resources working together. History of EIS Traditionally, executive information systems were developed as mainframe computer- based programs. The purpose was to package a company’s data and to provide sales performance or market research statistics for decision makers, as such financial officers, marketing directors, and chief executive officers, who were not well acquainted with computers. The objective was to develop computer applications that would highlight information to satisfy senior executives’ needs. Typically, an EIS provides the data that would only need to support executive level decisions instead of the data for all the company. Today, the application of EIS is not only used in typical corporation hierarchies, but also installed at the personal computer levels or workstation levels on a local area network. EIS now cross computer hardware platforms and integrate information stored on mainframes, personal computer systems, and minicomputers. As some client service companies adopt the latest enterprise information systems, employees can now use their personal computers to get access to the company’s data and decide which data are relevant for their decision makings. This arrangement makes all users capable to customize their access to the proper company’s data and provide relevant information to both upper and lower levels in companies EIS Components The components of an EIS can typically be classified into the following categories:
  4. 4. Hardware When talking about hardware for an EIS environment, we should focus on the hardware that meet executive’s needs. The executive must be put the first and the executive’s needs must be defined before the hardware can be selected. The basic computer hardware needed for a typical EIS includes four components: (1) Input data-entry devices. These devices allow the executive to enter, verify, and update data immediately; (2) The central processing unit (CPU), which is the kernel because it controls the other computer system components; (3) Data storage files. The executive can use this part to save useful business information, and this part also help the executive to search historical business information easily; (4) Output devices, which provide a visual or permanent record for the executive to save or read. This device refers to the visual output device or printer. In addition, with the advent of local area networks (LAN), several EIS products for networked workstations became available. These systems require less support and less expensive computer hardware. They also increase access of the EIS information to many more users within a company. Software Choosing the appropriate software is vital to design an effective EIS. Therefore, the software components and how they integrate the data into one system are very important. The basic software needed for a typical EIS includes four components: (1) Text base software. The most common form of text is probably the word processing document;
  5. 5. (2) Database. Heterogeneous databases residing on a range of vendor-specific and open computer platforms helps executives access to both company internal and external data; (3) Graphic base. Graphics can turn volumes of text and statistics into visual information for executives. Typical graphic types are: time series charts, scatter diagrams, maps, motion graphics, sequence charts, and comparison-oriented graphs (i.e., bar charts); (4) Model base. The EIS models contain routine and special statistical, financial, and other quantitative analysis. Now perhaps the more difficult problem to those executives is how to choose EIS software rather than how to use them, because the latest EIS software packages are more intelligible to nontechnicians, self- documenting, and more flexible. Therefore, when we evaluate EIS software, we should think about if the package is easy to use, if the package responds readily to the executive’s requests, and if the package is reasonably priced. Furthermore, we need consider if the package can run on the current hardware we have. Interface An EIS needs to be efficient to retrieve relevant data for decision makers, so the interface is very important. Several types of interfaces can be available to the EIS structure, such as scheduled reports, questions/answers, menu driven, command language, natural language, and input/output. It is crucial that the interface must fit the decision maker’s decision-making style. If the executive is not comfortable with the information questions/answers style, the EIS will not be fully utilized. The ideal interface for an EIS would be simple to use and highly flexible, providing consistent performance, reflecting the executive’s world, and containing help information and error messages. Telecommunications As decentralizing is becoming the current trend in companies, telecommunications will play a pivotal role in networked information systems. Transmitting data from one place to
  6. 6. another has become crucial for establishing a reliable network. In addition, telecommunications within an EIS can accelerate the need for access to distributed data. Intra-Building Telecommunications links constitute the backbone of telecommunications within a building. Since all voice/video/data traffic will travel through these pathways careful consideration should go into their design and implementation. EIS Characteristics A number of definitions have been put forward to describe EISs. While a definition is useful, in a complex area such as EISs a better understanding is obtained by looking at their characteristics. Some of these are given below: EISs are end-user computerised information systems operated directly by executive managers. They utilise newer computer technology in the form of data sources, hardware and programs, to place data in a common format, and provide fast and easy access to information. They integrate data from a variety of sources both internal and external to the organisation. They focus on helping executives assimilate information quickly to identify problems and opportunities. In other words, EISs help executives track their critical success factors. Each system is tailored to the needs and preferences of an individual user, and information is presented in a format which can most readily be interpreted. Although these characteristics apply to all EISs, each individual system can potentially differ in scope, nature, purpose and content, depending on the environment in which it is implemented. EIS Applications EIS enables executives to find those data according to user-defined criteria and promote information-based insight and understanding. Unlike a traditional management information system presentation, EIS can distinguish between vital and seldom-used data, and track different key critical activities for executives, both which are helpful in evaluate
  7. 7. if the company is meeting its corporate objectives. After realizing its advantages, people have applied EIS in many areas, especially, in manufacturing, marketing, and finance areas. Manufacturing Basically, manufacturing is the transformation of raw materials into finished goods for sale, or intermediate processes involving the production or finishing of semi- manufactures. It is a large branch of industry and of secondary production. Manufacturing operational control focuses on day-to-day operations, and the central idea of this process is effectiveness and efficiency. To produce meaningful managerial and operational information for controlling manufacturing operations, the executive has to make changes in the decision processes. EIS provides the evaluation of vendors and buyers, the evaluation of purchased materials and parts, and analysis of critical purchasing areas. Therefore, the executive can oversee and review purchasing operations effectively with EIS. In addition, because production planning and control depends heavily on the plant’s data base and its communications with all manufacturing work centers, EIS also provides an approach to improve production planning and control. Following are some real-world EIS applications related to manufacturing. Marketing In an organization, marketing executives’ role is to create the future. Their main duty is managing available marketing resources to create a more effective future. For this, they need make judgment s about risk and uncertainty of a project and its impact on company in short term and long term. To assist marketing executives in making effective marketing decisions, an EIS can be applied. EIS provides an approach to sales forecasting, which can allow the market executive to compare sales forecast with past sales. EIS also offers an approach to product price, which is found in venture analysis. The market executive can evaluate pricing as related to competition along with the relationship of product quality with price charged. In summary, EIS software package enables marketing executives to manipulate the data by looking for trends, performing
  8. 8. audits of the sales data, and calculating totals, averages, changes, variances, or ratios. All of these sales analysis functions help marketing executives to make final decisions. Following are some real-world EIS applications related to marketing. Financial A financial analysis is one of the most important steps to companies today. The executive needs to use financial ratios and cash flow analysis to estimate the trends and make capital investment decisions. An EIS is a responsibility-oriented approach that integrated planning or budgeting with control of performance reporting, and it can be extremely helpful to finance executives. Basically, EIS focuses on accountability of financial performance and it recognizes the importance of cost standards and flexible budgeting in developing the quality of information provided for all executive levels. EIS enables executives to focus more on the long-term basis of current year and beyond, which means that the executive not only can manage a sufficient flow to maintain current operations but also can figure out how to expand operations that are contemplated over the coming years. Also, the combination of EIS and EDI environment can help cash managers to review the company’s financial structure so that the best method of financing for an accepted capital project can be concluded. In addition, the EIS is a good tool to help the executive to review financial ratios, highlight financial trends and analyze a company’s performance and its competitors. Following are some real-world EIS applications related to finance. Context of research Considering the high costs involved and the high visibility of EISs within the organisation, it is not surprising that mostly success stories are described in the literature. Similarly, very few cases of EISs failures are documented. However, except for the successes and the few failures, most articles discuss situations where an EIS project was undertaken but for a variety of reasons failed initially. The large number of such articles, suggests that this type of failure is not an uncommon phenomenon and even organisations boasting a successful EIS, have probably experienced a setback before the eventual
  9. 9. development of a successful system. This effectively means that the implementation of an EIS constitutes a high-risk strategy for many organisations. Different researchers propose different factors which can affect EISs success. Although there is no clear agreement regarding the most significant factors, it is generally accepted that like any other information system, they relate to the development process. EIS however, support the continually changing information needs of executives. To be successful EISs need to continually evolve and expand to accommodate the dynamic requirements of their users. Incremental development is important and the post-initial implementation phases especially system use become important. EISs constitute a relatively new area of business information systems. This means that not much academic research has been done in the area and that no established theoretical infrastructure to support and guide practitioners exists. The novelty of EISs also means that practical experience with developing this type of system is limited. This contributes to the high costs involved in implementing an EIS. Motivation for Research: The motivation for this research is an interest in the reduction of the risk of failure associated with Executive Information Systems. For Executive Information Systems success, to a large extent, depends on the way the development process is carried out and on various issues relating to the use of these systems. The scope of the research includes the study of two areas of focus in relation to EISs. These refer to the development efforts and the usage of these systems. By identifying the factors which can influence success, developers should be able to take appropriate action to ensure that risks of failure are minimised.
  10. 10. Thesis Central Proposition: The proposed thesis aims to meet the following objective for Executive Information Systems: To minimise the risk associated with the implementation of an Executive Information System. The central proposition of the thesis is that: The identification of factors influencing specific EIS implementations can be used to guide development and post-implementation efforts to ensure that a system is successfully utilised for the purpose for which it was originally designed. Rationale: The rationale behind the idea is that, in order to develop a successful EIS, developers must have an awareness concerning the factors which could potentially influence the degree of success of the system. These factors have the following characteristics: Uniqueness to the individual environment in which a system is implemented: Executive Information Systems are highly customised systems. Each system differs radically in nature, scope, purpose and content depending on the environment in which it is implemented. This uniqueness extends to the factors affecting system success in each individual case. It would therefore be unrealistic to attempt to specify an implementation method which would universally produce a successful EIS. Factors relate to development process, particularly the usage phase: Due to the nature and informational needs of the user population, the usage of EIS becomes of particular importance. The implication of this in examining factors affecting EIS success, is that use should be examined separately from the rest of the development process.
  11. 11. People play a central role in these factors: For EIS people constitute an important element determining system success. As Armstrong remarks: "...we soon discovered that EIS success is not guaranteed by technology alone....even more important in EIS success [are] People." The high profile of EISs gives rise to people related problems of organisational and political nature. By having an awareness about these factors for a particular EIS project, developers can take appropriate actions to ensure success, or at worst to minimise the risk of system failure. It is therefore beneficial to be able to identify factors critical to the success of a system in a particular organisational setting to guide EIS development. Research Strategy: In the thesis we will propose a method to identify factors critical to the success of an Executive Information System developed in a particular organisational setting. This method can be integrated in the development process to ensure that appropriate actions are included in the development process to address these factors. The elements of the strategy followed are: 1) The construction of a suitable framework to capture and represent the characteristics of the factors described above. The framework will then be used as a template to: a. Capture and represent critical success factors for Executive Information systems. b. Model an organisation around the development and use of EIS. 2) The mapping of the organisational models, to the CSF models, thus identifying the specific influences upon a specific EIS development project.
  12. 12. The research strategy is summarised in the following diagram. Figure: Outline of Research Strategy The method can be applied not only to organisations planning to implement an EIS, but also to organisations with one operational. In the first case the method would provide an insight into the environment where the EIS will be developed while in the latter case it would serve to evaluate the effectiveness of the procedures employed and guide future expansions to the system. Criteria for evaluation of success: The degree of success of this research, will be assessed at two levels: Success of the Framework The success of the framework will be judged according to the following criteria: 1. Capacity to facilitate representation of all factors identified as critical to the success of an EIS. 2. Ability to distinguish factors relating to the usage of EIS from the rest of the development process.
  13. 13. Success of the Overall Approach The approach aims to meet the objectives set and reduce the risk associated with Executive Information Systems in two ways: (a) by providing an insight and guidance for practitioners in the area, and (b) by contributing to existing academic knowledge and facilitating further research. The success of the approach needs to be evaluated by two sets of criteria, relating to its practical and academic value. Practical: a. Practicality (e.g. ease of use, required resources, time) b. Applicability in a wide range of possible scenarios. Academic: Usefulness as an analytical tool for further research. Advantages and Disadvantages of EIS Advantages 1. Easy for upper-level executives to use, extensive computer experience is not required in operations 2. Provides timely delivery of company summary information 3. Information that is provided is better understanding 4. Filters data for management 5. Improves to tracking information
  14. 14. Disadvantages 1. Functions are limited, can not perform complex calculations 2. Hard to quantify benefits and to justify implementation of an EIS 3. Executives may encounter overloaded information 4. System may become slow, large, and hard to manage 5. Difficult to keep current data 6. May lead to less reliable and secure data 7. Small companies may encounter excessive costs for implementation Future Trends in EIS The future of executive info systems will not be bound by mainframe computer systems. This trend allows executives escaping from learning different computer operating systems and substantially decreases the implementation costs for companies. Because utilizing existing software applications lies in this trend, executives will also eliminate the need to learn a new or special language for the EIS package. Future executive information systems will not only provide a system that supports senior executives, but also contain the information needs for middle managers. The future executive information systems will become diverse because of integrating potential new applications and technology into the systems, such as incorporating artificial intelligence (AI) and integrating multimedia characteristics and ISDN technology into an EIS. Relationship of Systems to One Another Different types of systems exist in organizations. Not all organizations have all of the types of systems described here. Many organizations may not have knowledge work systems, executive support systems or decision support systems. But today most organizations make use of office automation systems and have a portfolio of information
  15. 15. system applications based on TPS and MIS (marketing systems, manufacturing systems, human resources systems). Some organizations have hybrid information systems that contain some of the characteristics of different types of systems. The field of information systems is moving so quickly that the features of one particular type of system are integrated to other types (e.g. MIS having many of the features of ESS). System charecteristics evolve and new types of systems emerge. Yet the classification of information systems into these different types is useful because each type of system has certain features that are relevant in particular situations.
  16. 16. Conclusion Executive Support Systems (ESS) or Executive Information Systems (EIS) provide a generalized computing and communication environment to senior managers to support strategic decisions. They draw data from the MIS and allow communication with external sources of information. But unlike DSS, they are not designed to use analytical models for specific problem solving. ESS are designed to facilitate senior managers' access to information quickly and effectively.ESS have menu driven user friendly interfaces, interactive graphics to help visualization of the situation, and communication capabilities that link the senior executive to the external databases he requires.