Management Information Systems

1.1 INTRODUCTION
Today we have an unquenchable thirst for information. The society hac; changed significantly
from the Barbarian to the Agrarian Society, from Agrarian to the Industrial Society and
from the Industrial Society to a Society dominated by the Service Sector.
This structural transformation has brought about discernible changes in the way people
think. We are all living, not in an Agrarian or Industrial Society but in an Information
Society. In fact, we generally refer to the present times as the IT Age or Information Era.
Cndemeath this is a tacit acceptance of the fact that not since the advent of the automobile
and the introduction ofthe telephone has, an invention had such wide-spread impact on
our society as the computer, which has ushered in the Infmmation Era.
l f personal/individual life has had so much impact due to information, it has had profound
impact on Business Organi?ations.
We are living in an era characterized by Globalization and Liberalization. Far reaching
changes across borders arc sweeping nations and we are all getting engulfed in a boundary-
less "Global Village". But this emerging scene also necessitates people to develop the
ability of"Thinking Globally and Acting Locally", which is now also being referred to as
"Glocalisation". Business operations have become, and are going to become, more and
more complex, and competitive.
The increased complexities could be broadly categmized into Business Complexities and
Management Complexities.
The increased Business Complexities could be attributed to :
I. Technological Revolution
2. Research and Development
3. Changes in Product/Product Life Cycle
4. Explosion oflnformation

The increased Management Complexities could be atttibuted to :

1. Management Science Technologies
2. Decision-making
3. OnsetofComputers
4. Information Feedback System

2
Unit I Management Information Systems

These complexities have, in tum, necessitated :

1. Strategic Planning
2. Setting of Objectives (parameters)
3. Devising Operational Plans
4. Obtaining I Processing/ Storing, Retrieving and using information for decision-making.

Hence, information is today seen, indeed accepted and recogni:~.cd, as an invaluable source
to ensure effective and efficient decision-making thereby ensuring optimality of results
leading to survival and prosperity ofthe Business Organization.
Information is a Resource because:
• It is scarce
• It has a cost
• It has alternative uses
• There is an opportunity cost factor involved if one does not process information
It must, however, be remembered that unlike other resources, which can be used only
once, information could be used again and again. It is also not tangible. A decision maker
must keep these aspects in mind.
Many a times, we really do not have the information we want and then there is a dilemma.
The dilemma is beautifully expressed in the following words, generally referred to as Fingale's
Law oflnformation :
"The information we have,
Is not what we want,
The information we want
Is not the information we need,
The information we need,
Is not available".
Hence, it is said that,
"Don't give the manager,
What he said he wanted.
But what he meant".

3
Management Information Systems

Thus, because information is so critical, crucial and pivotal tor managers and organi7.ations,
there has emerged the MIS- The Yranagement Information System-to facilitate effective
and efficient decision-making.
One important aspect ofthe difference between MIS and routine data processing is the
capability to provide analysis, planning, and decision making support. An MIS orientation
means users have access to decision models and methods for querying the database on an
ad hoc basis; the database is also, an essential part of routine transaction processing and
reporting. In MIS information is utilized so as to improve decision making and achieve
improved organizational effectiveness.

1.2 WHAT IS MIS?

MIS is the system, which makes available the right information to the right person, at the
right place, at the right time, in the right form and at the right cost.
There arc, of course, various definitions of MIS. Before we go further, let us try to
recapitulate some ofthese definitions.
According to Davis and Olson, "MIS is an integrated user-machine system for providing
information to support operations, management and decision-making functions in an
organization. The system utilizes computer hardware and software, manual procedures/
models for analysis, planning, control and decision-making and database".
Kelly has defined MIS as "a combination ofhuman and computer based resources. which
result in collection, storage, retrieval, communication and use of data for the purpose of
efficient management of operations and for Business Planning".
Lucey has defined MIS as "a system to convert data from internal and external sources
into information, to communicate that information, in an appropriate form to managers at
all levels, in all functions to make timely and effective decisions for planning, directing and
controlling the activities for which they arc responsible".
According to Henry C. Lucas, "MIS is a set of organized procedures which when executed
provide information to support decision-making".
Krober and Watson have defined MIS as "an organized set of processes that provide
information to managers to support the operations and decision-making within an
organization".
From the various definition s quoted above, we can state that the MIS is basically an
integrated system which transforms the data (inputs) into reports (outputs) for facilitating
Unit I Management Information Systems

decision-making through processing and using various components ofthe information system
viz. Hardware, Software, Database, Procedures and Personnel.
A formal system should be able to take care of the following points:-
Handling ofa voluminous data
• Confirmation of the validity ofdata and transaction.
• Complex processing of data and multidimensional analysis
• Quick search and retrieval;
• Mass storage
• Communication ofthe information system to the user on time
• Fulfilling the changing needs ofthe information
The management information system uses computers and communication technology to
deal with the above mentioned points of supreme importance.

J6 Activity A :
Explain with example the meaning of "Don't give the manager, What he said he wanted,
but what he meant".

1.3 CONCEPT OF MIS

In view of the foregoing, the concept ofMTS can now be illustrated. Refer to Fig. 1.1.

5
 Management Information Systems

·C] 1

-r
1 -. Judgement/ SkiW External
l__!>~mg Logic Intuition Experience Environment ..
_ _____. I -- ~ DeciSion
nata .. comput~rs J trntellige~ce] •I nesi~ ---.[choi~ 1h
Data [HumanBem~
,---- ----
_- __ Infor-
.. .
Dcctsion Making
j

Data___. UL Data base ~

MIS
mation ~
~sion Jmllcmen_tan
_·o_n_,

L Monitoring / Fcedba~

Fig. 1.1 : MIS Concept

~
[ Performance]

Thus, in our discussions we will always consider MIS, which is based on making use of
computers for processing and providing information.

1.4 ROLJi: OF 1\'DS

- -· - - ----·--------
As stated earlier, MIS has become necessary due to the increased Business and
Management Complexities. These complexities demand not only quantitative but qualitative
decision-making. And all managers, as we know, have to take decisions under conditions
ofRisk, Certainty or Uncertainty. A good manager/decision-maker is one who minimizes,
ifnot eliminates altogether, the elements ofrisk and uncertainty in decision-making. MIS is
helpful in doing precisely this.
Hence, MlS is required to enable managers to take qualitative decisions and ensure success
for their respective organizations. MIS also enables the managers to minimize the element
of surprise.
Then again, MlS enables decision-maker to come out with appropriate response to a
business situation. MIS, thus, enables decision-maker to give either a re-active or proactive
re.'>ponse. As, however, the decisions arc also futuristic, MIS facilitates pro-active decision-
making- it enables the managers/organization 'to be ready for tomorrow, today.' MIS,
thereby, can act or function both as an instrument of defence as well as a weapon for
offence, with strong strategic planning base.
Impact of MIS

MIS creates an information based work culture in an organization.

Since MIS plays a very important role in the organization, it creates an impact on the

6
Unit I Management Infonnation Systems

organizational functioning, performance and productivity. The impact ofMIS on the function
is in its management. With a good MIS support, the management of marketing, finance
production and personnel became more sufficient. The tracking and monitoring of the
functional targets becomes easy. The functional mangers are informed about the progress,
achievements and shortfalls in the activity & targets. The mangers I is kept alter by providing
certain information indicating the probable trends in the various aspects ofbusincss. This
helps in forecasting and long term perspective planning. The managers attention is brought
to a situation which is exception in nature, inducing him to take action or a decision in the
matter. A disciplined information reporting system creates a structured database and a
knowledge base for all the people in the organization. The information is available in such
a form that it can be used straight away or by blending and analysis, saving the manager's
valuable time.
MIS creates another impact in the organiz.ation by making it convenient to understand the
business better. MIS begins with the definition ofa data, entity and attributes respectively,
designed for information generation in the organization. Since all information systems usc
the dictionary, there is a coming understanding ofterms and terminology in the organi7.ation
bringing clarity in communication and also a similar understating of an event in the
organization. MIS calls for systematization of the business operations for an effective
system design. This leads to streamlining ofthe operations, which complicate the system
design. It improves the administration ofthe business by bringing a discipline in its operations,
as everybody is required to follow and use systems and procedure. The process brings a
high degree ofprofessionalism in the business objects. Since the goals and objectives of
MIS are the product ofbusiness goals and objectives, it helps indirectly to pull the entire
organization in one direction towards the corporate goals and objectives by providing the
relevant information to the people ofthe organization.
A well designed system with a focus on the managers makes an impact on managerial
efficiency. The use ofcomputes help managers to use the tools and techniques, which arc
impossible to usc to use manually. The ready-made packages make this task simpler.
The impact is on the managerial ability to perform. It also improves the decision-making
ability considerably.

1.5 CHARACTERISTICS OF MIS

Let us also keep in mind that, while, originally, MIS was envisioned as a single, highly
integrated system, bringing together data processing for all organizational functions, MIS
is now viewed as a Federation of Subsystems, developed/implemented as needed but
conforming to an overall plan. To illustrate, each organization will consist of sub-systems

7
 Management Information Systems

like Production, Inventory, Finance, Marketing etc. There could be Functional sub-systems
as well as Activities sub-systems as illustrated. Refer to Table 1.1 & Table 1.2.
Table 1.1 Functional Sub-systems
r e~-- -~ales forccasting,-
sa-les-plann-in-g, customer_an_d_sa_le1_s_an_a_ly-si-s.-1
__j~ction pl.;,ning and scb;;;hiling, cost co;;;;;;}an~]
- ufucturing
Logistics
Personnel
j' Planning and control ofpurchasing, inventories, distribution.
Planning personnel requirements, analyzing perfmmance,
I
salary administration.
-------- - - - - - --1
Finance&Accounting i Financial analysis, cost analysis, capital requirements
planning, income measurement.
1 - - - - -- -- - -- --1---- - - - - - - - - - - - - - - - - - - - - - - ;
Information Processing Information system planning, cost-effective analysis.
- -
· ------+----- - - ---- ------- -- - -
Top Management Strategic planning, resource allocation.
- - - - - - - - - - ---- - - - -
Table 1.2 Activities Sub-System

~saction Processing j Processing of order~pments ~eipts.

I
' Operational Control ~cheduling ofactivities and performance reports.
Management Control Formulation of budgets and resource allocation.
Strategic Planning Formulation of objectives and strategic plans.
_ _ _ l _ _ _ _ __

Each ofthese sub-systems will have a certain degree of autonomy or independence in its
functioning. But no sub-system can function as an island by itself, to the detriment ofother
functional sub-systems. Each sub-system must operate within the overall corporate goaV
plan. Thus, because these sub-systems, although enjoying autonomy, arc loosely connected
and arc interdependent, MJS is viewed as a Federation of Sub-systems as illustrated.
Refer to Fig. 1.2.

8
Cnit I Management Infonnation Systems

§co
..§
00
.§
..... ~
'i)
c
~~ ·.o.S
8§
C\lg §~
0 ·.p c p
Activities ~ co

-
@
~
e
0..
~ Vl
"50
3
0
~
c.. £<
tEo
c""
..... c...
~
p::
n r--
I' - -1 - r--

Strategic Planning L I
f-- -
L l
Management Control
I .
-t-~
Operational Control

Transaction Processing
I
I I I I r
rL [!lata Base Management System
Data Base
J
·-
Fig. 1.2 : MIS as a Federation of Sub-systems

This feature has also facilitated the modularity and development of computer based
information system on a modular pattern, permitting autonomy but ensuring interdependence
and wholistic perception.
MIS as seen by the user
The major users ofa computer based information system are shown in Table 1.3.
Table 1.3 MIS as seen by the user
U
-
.-I se
-r------~,.Uses - - - - - - - - - - - .- - -- ----.

Clerical Personnel Handle transactions, process input data and answer inquiries.
First Level Managers Obtain operations data. Assistance with planning, scheduling,
identifY out-of-control situations, and making decisions.
--j

Staff Specialist<; Information for analysis,Assistance with analysis, planning and

reporting.
Managemcn~ Regular reports, Ad hoc retrieval requests, Ad hoc analyses,
I
1

Ad hoc reports, Assistance in identifying problems and

opportunities, assistance in decision making analysis
- -- - - - - - -''-- - - - -- -- - ---- - - - --- --

9
 Management Information Systems

MIS is also viewed as a multi-disciplinary activity/subject. MIS draws heavily upon various
disciplines like Management Accounting, Management Scicnceffhcory. Organizational
Bchaviour!Theory, Operations Research, Computer Science etc. as illustrated. Refer to
Fig. 1.3.

Computer
Science

Operations Behavioural
Research Sciences

Fig. 1.3 : MIS: A multi-disciplinary subject

Management Accounting is meant for monitoring, controlling the organizational performance

and initiating course-corrective action whenever/wherever required. Management
Accounting also provides specific information, costs etc. about various activities which
can be made use for analytical and decision-making activities. 'Ibus, ManagcmentAccounting
is useful and is made usc of in MIS.
Management Science Techniques and Principles are inseparable part ofdecision-making.
They explain the dynamics ofdecision-making process, specify management functions at
various levels, and thereby facilitate development ofMIS.
MIS has to be developed and implemented in an organizational context. Organizational
Theory/Behavior enables MIS professional to understand organi7..ations, their types, cultures
and behavior. These arc valuable inputs as the success ofMTS would depend on how it
adopts/adapts to the specific organizational requirements. To illustrate, MIS perception in
a proprietary firm, family-owned company, Government Corporation or a multi-national
enterprise is certainly different. Hence, MIS also draws heavily upon the Organi7.ational
Behavior and Theory.
Decision-Making today involves extensive usc ofmathematical and statistical techniques.
Model Building, creating sccnruios, forecasting- all these activities involve mathematical/
statistical techniques. These techniques, embodied in Operations Research -which is using
statistics and mathematics for arriving at an optimal solution- are made use of in MIS.

10

-_,_ _ -
__ - --
Unit 1 Management Information Systems

As stated earlier, ~S is today based on computers. It is then no wonder that MIS makes
extensive usc ofcomputer science and technology for data storage, processing, manipulation,
retrieval etc. due to the speed, processing capability and memory size ofthe computers.
As MIS cannot be developed without making use of the various theories, principles,
formulae, MIS is viewed as a multidisciplinary subject.
MIS is also considered to be an evolving subject. MIS has come to play a much larger
role in the organizational life, as compared to the 1950s. While, initially, MIS brought
about more technical changes, MIS has since moved into managerial control and further
into int1uencing the 'core' institutional activities, as shown in Fig. 1.4.

~l MIS - ~
I

I
Technical M-magerial Institutional
Changes Control Core
'
Activities

r-----~------~--~------~--~------~ ~
~ 1950s 1960s
l
1970s 1980s 1990s
Fig. 1.4 : Changing MIS Focus

Further, though initially, MIS started with Electronic Data Processing, it has since moved
to Management Science/Information Systems, Decision Support Systems, Executive
Information Systems, Knowledge Based Experts Systems, Artificial Intelligence etc. as
could be seen from the Fig. 1.5 .

.Fig. 1.5 : Evolution of CBIS

11
 Management Information Systems

EDP: Focus on Data

OAS :Focus on Communication
MIS :Focus on Infom1ation
DSS :Focus on Decision Support for a specific business problem
EIS: Focus on Decision Support for Top Management
ES : Focus on Consultation
AI: Focus on self-learning/thinking systems

:.

1950s - - - - - - - - - --- - - - - -·-- -- ______. 2lstCcntury

Fig. 1.6 : Evolution of MIS

12
 Gnit I Management Information Systems

Consequently, the users and the characteristics ofMIS have also undergone changes over
the years as can be seen from the Table 1.4.
Table 1.4 Changes in MIS
Type of Information Processing Information Users
System Inputs Outputs
ESS/EIS 1 Aggregate da ta,extemal. Graphics; simulations, Projections; Senior Managers I
internal interactive response toqueries
~ Low-volume data:
-
Interactive: simulations. Special reports; Professionals:
analytic modcis analysis decision analysis; Stan· Managers
responses to queries
MIS ' Summary Transaction Routine reports; simple Summary Middle Managers
1
J data:high vol ume data: models, low level andexception
simple mode Is analysis reports
KWS-~ Design speci fications: Modeling, simulations :vt:odels, Graphics Professionals.
Knowlcdgebase technical staff
1-----..L- '
OAS Documents, schedules Document management; Document; Clerical workers
scheduling; schedules;mail
communication
-
fPS Transactions ; events Sorting; listing; merging; Detailed reports: Operations
updating lists; summaries personnel;
i Supervisors
--

_,g Acti.Yity B:
How would implementation ofMTS facilitate the working ofany organb11tion?

1.6 PRE-REQUISITES OF MIS

The pre-requisites ofMIS are as follows :
1. Should be a unified system.
Should support/facilitate decisions.

13

L
 Management Information Systems

3. Should be compatible with the organi:zation's structure and culture.

4. Should have user-involvement and user-orientation.
5. Should be cost-effective/beneficial.
6. Should use the principle of selectivity and control by exception.
7. Should be responsive to changes around and within the organization.
8. Should be speedy and accurate.
9. Should provide validated and valid information.
I0. Should be "Management" and NOT "Manipulated" Information System.

1.7 CONTEMPORARY APPROACIIES TO MIS

Systems development has ceased to be a purely technical activity. While developing

Information Systems, due attention is also !:,riven to the related aspects like organizational
structure, organizational culture, people behavior etc., along with the technical aspects.
The Contemporary Approaches to Information Systems Development could be broadly
categorized into :
1. The Technical Approach
2. The Behavioral Approach
3. The Socio-TcchnicalApproach

1. The Technical Approach

1bis approach is centered around mathematical and normative models to study information
systems. It also relics heavily on the physical technology and the formal capabilities of
these systemc;. As such, Computer Science, Management Science and Operations Research
Disciplines contribute significantly to the Technical Approach.
2. The Behavioral Approach
While Information Technology may heavily depend upon the technical aspects/disciplines,
the developer has to consider the behavioml impact/response ofpeople in the organizations
where Information Systems would .be implemented. Indeed, Motivational Feasibility is
now considered to be of critical importance while developing Information Systems.

14
Unit I Management Information Systems

As Information System has to address and take cognizance ofbehavioral problems and
issues (system utilization and system implementation to mention a few), it is imperative that
behavioral factors arc taken into consideration.
The Behavioral Approach, therefore, borrows heavily from the principles ofPolitical Science,
Psychology, Sociology and Organizational Behavior, among others. This approach,
according to Kling and Dutton, focuses not on technical solutions but on the changes in
attitudes, management and organizational policy.
3. The Socio-TechnicalApproach
It is now reali:t.ed that the problems faced while developing and implementing Information
Systems arc neither purely technical nor behavioral. It, therefore, becomes important to
understand the perspectives ofbotb technical as well as behavioral disciplines. Perspectives
from other disciplines would also be immensely helpful/useful.
The Socio-Technical Approach does not opt for purely technical/technological or behavioral
approach, but it docs attempt to borrow heavily from both the approaches and synthesize
so as to optimize the performance ofthc Information System as a whole.
This approach is now being increac;;ingly accepted and implemented.

1.8 INFORMATION AS A STRATEGIC RESOURCE

-- - - - - --------
With the increasing and intensifying trends towards globali7.ation, competition is increasing
and becoming more global, relentless and fierce. Increasing competition, in fact, is leading
to intense competitive rivalry. C. K. Prahlad, interestingly, refers to this trend as 'competitive
battlefield', as this is what the global market has effectively degenerated itself into.
Global competition has increased performance standards in many dimensions covering the
whole gamut ofcost, price, quality, technology, productivity, product launch/ introduction
time and smooth flowing operations. Moreover, these standards are not static. They arc
exacting, requiring continuous improvement from the corporate organizations.
Hence, to survive, succeed and prosper in the present competitive environment, strategic
competitiveness would have to be earned/achieved by the corporates not only by meeting,
but exceeding prevailing global standards. But to exceed the global standards, an organization
must first know what they arc and then only attempt first to reach and then surpass/better
them. Like, if one has not even heard of'Six Sigma' the question ofbcing a zero defect
company simply would not arise !

15
 Management Information Systems

This peculiar dilemma leads to a series of actions and reactions, initiatives and responses
among the firms competing within a particular industry/sector. The dilemma also further
leads to competitive inter-action which often shapes the competitive position of firms,
undertaking the corporate strategies.
This process, in its tum, gives rise to the phenomenon known as "Competitive Dynamics".
Because of competitive dynamics, the effectiveness of any corporate strategy ("what an
organization is today and what it OUGHT to be tomorrow") is determined not only by the
initial move, but also by how well the firm anticipates and addresses the moves and
countc1moves ofcompetitors and the shills occurring in customer demands over a period
oftime. The competitive dynamics also has to take into consideration the fact that while,
earlier, the competitor's Research & Development efforts and Product Decisions could be
known in a few month's time and then acted upon, in today's highly globalised and
information-based economy, any idea that works can sometimes be imitated in a matter of
a few days, if not hours !
In this connection, it would be interesting to note that, as reported, many firms competing
in the electronics industry often DO NOT APPLYFORPATENTS to prevent competitors
from gaining access to the technological knowledge included in the Patent Application !
It is in this overall context that INFORMATION has emerged as a STRATEGIC
RESOURCE - resource that is scarce, has significant cost and has alternative uses -
bestowing competitive edge on the organization which possesses it. lienee, in the present
competitive environment information/knowledge has become a critical organizational
resource and is increasingly considered/accepted as a valuable strategic resource or as an
invaluable asset for competitive advantage.
The probability ofachieving strategic competitiveness in the present competitive environment
could be enhanced for the organization that realizes that its survival, success and prosperity
depends on the ability to capture information, transform it into usable knowledge and
disseminate it rapidly throughout the organization. Organizations that accept this challenge,
shift their focus from merely OBTAINING the information to EXPLOITI}IG the
information, to gain a strategic competitive advantage over competing I rival firms.
Access to and availability of information yields strategic opportunities and results in an
unbelievably large array of strategic implications and possibilities. To be able to grab and
retain the strategic competitive edge, it is imperative for the organizations to be able to
raise and answer questions like -
1. What business the organization should be in?
2. What existing busim,"Ss activities should be spun off?

16
Unit I Management Information Systems

3. What new activities should be undertaken?

4. How to protect/insure the organization from business cycles/business swings?
5. What are the competitors doing and can do, as revealed by their current strategy?
6. What drives the competitors, as shown by their future objectives?
7. What do the competitors believe about themselves and the industry, as shown by
their assumptions?
8. What are the competitors' capabilities?
Information about the aforesaid issues would help an organization prepare an anticipated
"Response Profile" of each competitor, covering, the following aspects:
(a) What will the competitors do in the future?
(b) Where does the organization hold an advantage over its competitors ?

(c) I low will this change the organization's relationship with its competitors?
All these questions could be answered by undertaking "Competitor Analysis" or resorting
to "Competitive Intelligence" or "Business Intelligence".
It has to be noted that critical to "Business Intelligence" or "Competitive Intelligence" or
"Competitor Analysis" is the gathering of Data and Information. Data and Information can
help the fmn understand competitors' intentions and strategic implications resulting from
them.
The Data/Information should cover not only the competitors but also the public policies
from countries across the world. Such data/information not only enables the recipient of
such information to better understand and better anticipate competitors' objectives,
strategies, assumptions and capabilities, but also provides an early warning ofthreats and
opportunities emerging from the global public policy environment, and analyze how it will
affect the achievement ofthe company's strategy.
The information, collected through bu.c;iness/compctitive intelligence or competitor analysis,
enables the organization to gain insights it requires to help create a competitive advantage
and to increase the quality of strategic decisions it makes when choosing how to compete
against its major/emerging competitors/rivals.
To conclude, in the ultimate analysis, out there on/in the "competitive battlefield", it is going
to be the survival ofthe fittest.
To survive, succeed and prosper in this fiercely competitive environment, the corporate

17
 :'vlanagement lnfonnation Systems

organizations have to be cost/price/technology/quality competitive. They also have to be

more profitable, be able to respond quickly and offer better quality products/services
ahead ofthe competitors and at prices lower than the competitors.
No doubt, this is a tall order. But, iforganizations do not respond in a pro-active manner,
using information, the market forces will correct for their inactions. Such organizations
would lose market share and suffer other, more serious and dire consequences including
not only not being part of the business but rather moving into the oblivion !
Those organizations that will have information, would gain the strategic competitive edge
and proceed to the finish line to emerge winners. Those organizations that do not possess
information would be left behind to be branded as "Also Rans" and best left to struggle for
survival. Today, the corporate organifations arc thinking in tetms of'volumes' and "Business
@ Speed of Thought". These corporates arc in a big hurry to penetrate and capture
markets world-wide. Most ofthem must also be thinking the same way Eckhard Pfeiffer,
the former CEO of Compaq, had once thought. Pfeiffer had once stated: 'We want to do
it all, and we want to do it now".
Ifthis is the ac:;piration, information is the real enabler as a strategic resource.
In the last few years MIS as a function in a business enterprise has seen a gradual shill
from a "back office" support function to a front end mission critical area ofbusiness.

1.9 USE OF 11\"FORMATION FOR COMPETITIVI~ ADVANTAGE

Dramatic changes have occurred in Information Technology over the last few years. These
changes, in turn, have ushered in an Information Revolution which is sweeping the corporate
organizations world-wide.
The corporate business environment has, resultantly, become intensely competitive,
increasingly globalised and highly information-based. In such a highly competitive
environment, it is imperative for an organization to strive to seek and seize competitive
advantage to emerge winner. Ability to access and usc information effectively has been an
important source of competitive advantage for a number ofcorporate organizations.
What is Competitive Advantage?

"Competitive advantage is about changing the balance of power between a frrm and its
competitors in the industry, in the firm's favor".
Alternatively, "Competitive Advantage could be usually embodied in either a product or a
service that has the most added value to customers and that is unavailable from the
competition".
18
Unit 1 Management lnfom1ation Sysh:rns

Competitive advantage could also be seen "as an internal system that delivers benefits to a
firm, not enjoyed by its competition".
What is the Role of Information in Competitive Environment?

As is clear by now, Information, Information Tcclmology and the resultant Information

Revolution - THESE TERMS, INCIDENTALLY, WOULD BE USED
INTERCHANGEABLY IN OUR PRESENT DISCUSSIONS- arc changing the rules
of the game and creating new paradigm shift.<>, giving companies new ways to out-perform
their rivals. This, in turn, facilitates the organizations gaining competitive advantage.
Before, however, we note the specific ways in which infom1ation can be used for competitive
advantage, let us first run through what Michael Porter and Victor Millar had to say in this
regard, as far back as 1985 (IIBR, July IAugust 1985), which is valid even today.

1.10 PORTER-MILLAR POSTULATES

According to Porter and Millar, Information Technolo!:,>y is affecting competition in three

vital ways;
1. It changes industry structure, and, in so doing, alters the rule of competitions.

2. It spawns whole new business, often from within the company's existing operations.

3. It creates competitive advantage by giving companies new ways to out-perform their

rivals.
1. Changes in Industry Structure:

According to Porter and Millar, the structure of an industry is embodied in five

competitive forces that collectively determine the industry profitability :
a. The bargaining power of customers.
b. The bargaining power of suppliers.
c. Threat of new entrants in the firm's market.
d. Pressure from substitute products or services.
e. Positioning oftraditional industry competitor/s.
Information and Information Technology can alter each ofthe five competitive forces
and thereby help the fim1 gain competitive advantage.

19
 :'v!anagement Information Systems

2. Spawning of ~ew Business :

Information, LT. and the resultant Information Revolution arc giving birth to completely
new industrie..<; in three distinct ways :
a. The Information Revolution makes new business technologically feasible.
b. Inforrnation!I.T. also spawn new business by creating derived demand for new
products.
c. Information and Information Technology help create/spawn business within old
ones.
By enabling a firm to spawn a new business, information confers competitive advantage
to the firm as it can offer a bundle of goods/services.
3. "New Ways of Doing the Things" :
Information and LT. facilitate evolution/development of new ways of doing old things
differently. This difference makes the difference and confers competitive advantage
on a firm.
In order to understand the specific usc of information for competitive advantage we
would consider the uses under two types :-
a. Functional Uses
b. Strategic Uses.
a. Functional Uses
1. Information helps lower cost in any/all parts of"Value Chain". Value Chain
is basically a system of interdependent activities which arc connected by
linkages. Information not only affects how individual activities are performed,
but through new infmmation flows, it is also greatly enhancing a company's
ability to exploit linkages between activities, both within and outside the
company.
Competitive advantage is considered as a function of cost/value chain.
2. Information and Information Systems help in :
1 Facilitating product delivery
u. Adding value to quality; and
Ill Improving product quality

20
Unit 1 Management Infom1ation Systems

3. Information helps transform the physical processing component ofactivities

into information component leading to value addition.
4. Information bestows organizations with speed and ability to move quickly
into the market, thereby giving the organization the first mover's competitive
advantage. It also enables orgdlli?~tions to command a competitive premium.
5. Information helps organizations to enhance :
1 Quality oftheir operations
u. Quality oftheir products
Ill Quality ofthcir services
6. Infom1ation can help simplify :
1 Products
IL Product Processes
Ill Production Cycle Time
7. Information helps organi:t~tion
1 Meet benchmarking standards
u. Improve customer service
Ill Improve quality and precision of design and product
b. Strategic Uses
1. Information gives organizations new ways to out-perform their rivals.
2. A firm can usc four basic competitive strategies to deal with the competitive
forces
1 Product differentiation
IL Focused differentiation
Ill Developing right linkages to customers and suppliers
IV. Becoming a low-cost product
A firm may/can achieve competitive advantage by pursuing one or more of
these strategies simultaneously.
It is here where information helps an organization in gaining a competitive
advantage.

21
 Management lnfonnation Systems

3. The new intensity of information makes it possible for more precise

development ofstrategies, planning, forecasting and monitoring.
4. Information facilitates availability ofextensive data, both internal and external,
thereby facilitating a more comprehensive analysis and adding value
for/to : (i) Problem Solving (ii) Decision-Making.
5. Information and LT. help increase/improve an organization's abilities to
co-ordinate its activities regionally, nationally and globally. This, in turn,
helps w1lock/unleash the powers ofbroader geographical scope to create
competitive advantage.
6. Information enables organbations to "Think Globally, Act Locally".
7. In fommtion yields strategic opportunities and enables change the rules of
the competition very fast, almost overnight, and bestows competitive
advantage.
8. Information and I.T. (powerful computers, software and networks) help
organi:;r.ations become more flexible and responsive, eliminate management
layers, separate work from location and restructure work-flows, giving
additional competitive advantage to organizations.

9. lnfom1ation and I.T. help organizations acquire Strategic Flexibility. Strategic

Flexibility is "a set ofcapabilities firms usc to respond to various demands
and opportunities that are a part of dynamic and uncertain competitive
environment".

1.11 SUMMARY
--- ------ - -·-- - - - -
An MIS orientation means users have access to decision models and methods for querying
the database on an ad hoc basis; the database is also, an essential part ofroutine transaction
processing and reporting. In MIS information is utilized so as to improve decision making
and achieve improved organizational effectiveness. MIS is the system, which makes
available the right information to the right person, at the right place, at the right time, in the
right form and at the right cost. MIS has become necessary due to the increased Business
and Management Complexities. These complexities demand not only quantitative but
qualitative decision-making. And all managers, as we know, have to take decisions under
conditions of Risk, Certainty or Uncertainty. A good manager/decision-maker is one who
minimizes, ifnot eliminates altogether, the clements ofrisk and uncertainty in decision-
making. MIS is helpful in doing precisely this.

22
Unit l Management Information Systems

Each sub-system has a certain degree ofautonomy or independence in its functioning. But
no sub-system can function as an island by itself, to the detriment of other functional sub-
systems. Each sub-system must operate within the overall corporate

goal/plan. Thus, because these sub-systems, although enjoying autonomy, are loosely

connected and are interdependent, MIS is viewed as a Federation of Sub-systems.

The Contemporary Approaches to Information Systems Development could be broadly

categorized into: The lechnicalApproach, The Behavioral Approach, The Socio-Technical
Approach.

Information is a strategic resource - it is scarce, has significant cost and has alternative
uses - bestowing competitive edge on the organization which possesses it.

1.12 SELF ASSESSMENT QUESTIOI\"S

1. State the difference between typical data processing and management information
system.

2. Business complexities lead to development ofMIS. Do you agree with this statement?
JustifY your answers.

3. What is MIS? Explain its role a~d impact.

4. MIS :A multi-disciplinary subject- Explain.

5. Explain the evolution ofCBIS.

6. ·w hat are the contemporary approaches to Information Systems Development?

7. Explain the role and impact ofMIS on organization.

8. How docs MIS Confer Competitive advantage? Illustrate with real life corporate
examples.

23
 Management Information Systems

2.1 INTRODUCTION
The term Information Technology brings up different images for different people. While
for some it is the Super-Computer, for others, it means Lap Top or Palm-Top. While for
some it means the electronic gadgetry, for others, it means the efficiency in communication
channels.

As stated by Porter and Millar, Information Technology mu..c;t be conceived ofbroadly to

encompass the information that business create and use as well as a wide spectrum of
increasingly convergent and linked technologies that process the information. In addition
to computers, then, data recognition equipment, communications teclmologies, factory
automation, and other hardware and services are included.

According to the United Kingdom's Department ofTrade and Industry, "Information

Technology is the acquisition, processing, storage and dissemination of vocal, pictorial,
textual and numeric information by a micro-electronics- based combination ofcomputing
and telecommunications".

Information Technology is the term used to describe technologies which enable the users
to record, store, process, retrieve, transmit and receive infmmation. Infom1ation Technology
encompasses modem technologies such as computers, facsimile transmission, micro-
graphics, telecommunications and micro-electronics.

Today, we are all aware that Information Technology has provided new ways ofrecording,
storing, processing, retrieving, transmitting and receiving information enabling us - the
users -to build more effective and more efficient information systems.

2.2 IMPACT OF INFORMATION TECIL.~OLOGY

IT has changed the way bu..c;incss organizations function and carry out their activities. People
like Bill Gates today talk and write about "Business@ Speed ofThought" and information.
Most of us today routinely talk about and some of us actually deal in, c- Business, e-
Commerce etc. As stated by Davenport and Short, IT has tremendous and varied
capabilities. It has transactional, geographical, automational, analytical, informational,
sequential, knowledge management, tracking and dis-intermediation capabilities.

The IT capabilities and their organizational impacts arc briefly illustrated hereafter :

IT capabilities and their Organizational Impacts. Refer to Table 2.1.

26
 Unit 2 lnfom1ation Technology

Table 2.1 IT capabilities and their Organizational Impacts

I Capability ! Organizational Impact I Benefit

I
. --
Transactional IT can tnmsform unstructured processes into routines transactions
f-

Geographical IT can transform information with rapidity and ease across large
distance, making process independent of geography.
f i-- -- - --
Automational IT can replace or reduce human labor in a process.

Analytical IT can bring complex analytical method to bear on a process.

-
Informational IT can bring vast amounts of detailed information into a process.
1
- ·-
Sequential IT can enable changes in the sequence of tasks in a process, often
allowing multiple tasks to be worked on simultaneously.

Knowledge IT allows the capture and dissemination of knowledge and

expertise to improve the process.
1
Tracking IT allows the detailed tmcking oftask status, inputs and outputs. !
I
Disintermediation IT can be used to connect two parties within a process that would
otherwise communicate through an intermediary (internal or
external)
- - - - - - .
(Source : Thomas H. Davenport and James E. Short, "The New industrial Engineering: Information
Technology and Business Process Redesign'', Sloan Management Review II, Summer 1990).

These capabilities, however, can be exploited/made use of, if and only if, the business
organizations/managers understand and implement Information Technology. Computer and
I. Telecommunications provide the two main pillars oflnformation Technology.

i
2.3 UNDERSTANDL~G A COMPUTER
.,
According to the Information Technology Act, 2002, "Computer means any electronic,
magnetic, optical or other high speed data processing device or system which performs
logical, arithmetical and memory functions by manipulation ofelectronic, magnetic or optical
impulses, and includes all inputs, output, processing, storage, computer software or
communication facilities which are connected or related to the computer in a computer
system or computer network".

27
 Management Information Systems

A computer is an electronic device which accepts input, processes it according to a set of

instructions provided and generates the desired output. It operates on data . It can store,
process and retrieve data as and when desired

A computer system is a combination of diflerent elements

• Hardware:- All physical devices that the computer is made of

• Software :-Instructions that tell the hardware , what and how and to perfonn

• Data/Information:- Data is facts collected and given as input to the computer and
information is processed data i.e data is processed into useful information

Characteristics of a computer

1. Automatic : Computers are automatic machines because once started on a job, they
carry on, until the job is finished , normally without any human assistance.

2. Speed : Computers can work at a very high speed of milliseconds, microseconds

and nanoseconds A powerful computer is capable ofperforming millions of instructions
per second. The speed is measured in MHz (Mega Hertz, GHz (GigaHertz)

3. Accuracy : The accuracy ofa computer is consistently high. Every calculation is done
with same accuracy. If errors do occur they arc mainly due to fault in instructions
given to the computer or Hmlty data. Computer follows the rule of GIGO (garbage in,
garbage out)

4. Diligence : Diligence is the ability ofa computer to perform repetitive tasks with the
same accuracy consistently with tiredness. i.c.lt is free from monotony, tiredness and
lack of concentration.

5. Versatility :A computer can perform a variety oftasks ranging from very simple to
very complex.

6. Reliability: Computers consistently produced accurate results and hence are very
reliable. All information stored in a computer remains there till the users want it to be
there, even if recalled after years the information remains intact and accurate. No
detonation of data stored/information.

7. Storage : Computers can store large amount of data which can be accessed as and
when required and at a high speed.

28
 Unit 2 Information Technology

8. No Feelings/No Emotions/No Questions/No Intelligence

: Input
I' T'""' 'f"'' Output- ]
[ii{mary Storage

Arithmetic & I
Logical Unit 1 I
Central Processing Unit (CPU)

Fig 2.1 Basic Organization of a Computer System

The computer hardware consists of:

1. The Central Processing Unit (CPU)
2. InputDcvices

., 3. Output Devices
4. Storage Devices - Primary and Secondary
5. Physical media to link various communication devices.

1. Central Processing Unit (CPU)

The CPU consistc; ofthe Arithmetic/Logic Unit and the Control Unit. It is at the CPU
that the manipulation of symbols, numbers and letters takes place. The CPUalso
controls the other parts ofthe computer system. It is like the human brain.

The Arithmetic Logic Unit (ALU): The ALU in the CPU performs both arithmetic
and logical operations. On the arithmetic side, theALU adds, subtracts, multiplies
and divides, determining whether a number is positive, negative or zero. On the logical
side, it distinguishes between letters as well as numbers logically, and also determines
whether a given quantity is greater than or less than or equal to another quantity. The
type and number of arithmetic and logical operations, which a computer can perform,

29
 Management Information Systems

is determined by the engineering design oftheALU. MostALU's are designed to

perform the four basic arithmetic operations (add, subtract, multiply and divide) and
logical operations or comparisons.

The Control Unit (CU) :The CU selects and interprets programs instructions and
then checks their execution. It has some special purpose registers and a decoder to
perform these activities. The special purpose ref,risters help the control unit in instruction
selection, namely the instruction register and the program control register, which hold
the ctm·ent instruction and the next instruction to be executed respectively. The
decoder has the necessary circuitry to decode and interpret the meaning of ever
instruction supported by the CPU. Each instruction is accompanied by microcode
(very basic direction, which tells the CPU how to execute the instruction.

Inspite ofthe fact that control unit does not performing any actual processing ofthe
data it still acts as a central nervous system for the other components of the computer
by managing and coordinating the entire computer system including the input and
output units. The control unit receives instructions from the program stored in the
main memory, it interprets the instructions and issues signals which cause other units
ofthe system to execute them.

2. Input Unit

Data and instructions must be entered into the computer system, before any
computation can be performed. This task is performed by the inputunit, which links
the external environment with the computer system. Data and instructions enter input
units in various forms, which depend upon the particular input device used. Regardless
ofthe form in which input is received, all input devices must transform the input data
into binary codes, which the primary memory of a computer is designed to accept.
This transformation is accomplished by units called input interfi1ccs. The functions
performed by an input unit are:-

• It accepts/reads the instructions and data from the outside world

• It converts these instructions and data in computer acceptable form

• It supplies the converted instructions and data to the computer system for further
proccssmg.

30
Cnit 2 Information Technology

3. OutputUnit

As the name suggests it is absolutely reverse ofthe input unit. It supplies the
information obtained from data processing to the user. Since a computer works with
binary code, the results produced are also in the binary form, hence before supplying
the results to the user, it must be converted to human acceptable/readable form. This
task is accomplished by units called as output interfaces. Output interface-S are designed
to match the unique physical or electrical characteristics of output devices. The
functions performed by the output unit are :-
• It accepts the results produced by the computer, which are in coded form.
• It converts these coded results to human acceptable/readable fom1.
• It supplies the converted results to the user.

4. Storage Device

a. Primary Storage: Also referred to as main/core memory, primary storage is

where data and storage instructions arc stored for a temporary period till the
processing is completed. There are three different types ofprimary storage viz.
the Register (in ALU or CU), the Cache and the RAM. The linkage between
CPU, primary storage and the other devices is provided by the three buses viz.
Data Bus, Address Bus and Control Bus. The Data Bus moves data to and
from Primary storage. The Address Bus transmits signals for locating a given
address in primary storage. The Control Bus transmits signals specifYing whether
to read or write data to/from a given primary storage address, input device or
output device.

b. Secondary storage : This device is the relatively long-term non-volatile storage

of data outside the CPU and primary storage. Also called as Auxiliary memory
(supplementary, backup), it is low in cost and can store large volume of data on
permanent basis. Hard Disk, High Density Diskette, Magnetic Tape, Optical
Disk, are some of the secondary storage devices used.

31
 Management Information Systems

5. Physical media to link various devices together :

;------

CPU II
'

Arithmetic Primary
Logic Unit
- - Storage

- Contro!Unit I
DATA BUS
ADDRESS BUS
CONTROL BUS
..
-----=---t- -
INPUT DEVICES OUTPUTDEVIC~ SECONDARY
• Keyboard • Printers I STORAGE
• Video Display • Magnetic Tape
• Computer Mousej
• Touch Screen Unit I Monitor • Magnetic Disk
• Source Data • Plotters • Magnetic Drum
Automation • Audio Output 1 • Optical Disk
L-------------~

Fig. 2.2 Physical media to link various devices

a) List down the configuration ofyour computer along with operating system and
other software's installed on your machine.

32
Unit 2 Infom1ation Technology

b) Give any five examples ofinput units and output units.

2.4 GENERATJONSOFCOMPUTER

1. First Generation (1946-56)

The first generation ofcomputer refers to those computers which relied on and used
vacuum tubes for storing and processing data.

The computers were very big in size, could be located in a large room and had limited
memory and processing capability - The ENIAC, for example, had only 20 storage
registers and could accomplish 5000 additions per second.

The vacuum tubes generated lot of heat, consumed great deal of power and bad a
very short span oflife. Resultantly, the MTBF (Mean Time Between Failure) was
low -of the order of an hour.

The computers were used by technical people mainly for scientific and engineering
work. The maximum main memory size was reported to be around 2KB (2024
Bytes) and the speed of about 10,000 Instructions Per Second. Computer
programming was mainly carried out in Machine Language and later in Assembly
Language.

2. Second Generation (1957-63)

The second generation computer appeared on the scene around 1955-56. The
computer used transistors made ofgermanium semi-conductors material, instead of
the vacuum tubes, for storing and processing data.

Transistors were more compact in size and more reliable. Transistors consumed less
power and consequently the MTBF (Mean Time Between Failure) became longer.

It is said that the transistors were about ten times more reliable, ten times faster,
consumed one tenth ofpower, occupied about one tenth ofspace and were ten times

33
 Management lnfonnation Systems

cheaper than the first generation computers. The memory size and processing speed/
capability also went up simultaneously.

A typical second generation computer could have upto 32 KB of RAM and speed
upto 2,00,000 to 3,00,000 instructions per seconds. The years 1956-63 also
witnessed the emergence ofmagnetic core memory and development of High Level
Language like ALGOL, COBOL, FORTRAN and SNOBOL.

Resultantly, computers became more widely accepted and used. Computers which
were earlier used for technical/scientific work, were now accepted by the industry
and business. During this period, the business and applications of computers were
mainly in the areas of Pay Roll, Inventory, Production Planning, Marketing and
Accounting.

3. Third Generation ( 1964-79)

The third generation ofcomputers emerged with the introduction ofa newer technology
-the Integrated Circuits/Chips. The third generation ofcomputers witnessed transistors
being replaced by silicon chips-- more popularly known as the Integrated Circuits/
Chips.

The ICs were circuits consisting oftransistors, resistors and capacitors grown on a
single chip ofsilicon. The Integrated Circuits/Chips were made by printing hundreds,
and later thousands, oftiny transistors on small silicon chips, called Semi-conductors.

The Integrated Circuit.;;/Chips further revolutionized computer processing. Switching

speed of transistors went up by a factor of 10, reliability increased by factor of 10,
power dissipation declined by a factor of 10 and size reduced by factor of 10.

The cumulative effect was the emergence of extremely compact, yet powerful,
computers. Computer memories expanded to 2 MBs of RAM and processing
speed of CPU went up to 5 Million Instructions Per Second (MIPS).

The improved/increased CPU capabilities led to development oftime-shared operating

systems, made on-line systems feasible and led to the emergence of Integrated Data
Base Management Systems.

There were further improvements in High Level Languages. It was during this period
I generation that it became possible for people without extensive technical training to
make use of computers, making it possible for computers to enlarge their role in

34
Unit 2 Information Technology

business, thanks to newly developed systems like dynamic production control systems,
airlines reservation systems, interactive query systems etc.

4. Fourth Generation (1980 Onwards)

The computers which we handle today belong to fourth generation which extends
from 1980 to the present. The fourth generation computers are characterized by the
usc ofvery large scale integrated circuits (VLSICs) which are packed with as many
as 2,00,000 to over 3 million circuits per chip.

Ac. a result, the power of a computer that once took up a large room, could now
reside on a small desk-top/tower-top/lap-top and even palm-top.

The VLSIC technology has fuelled a growing movement towards micro- processors
and micro-miniaturization- the proliferation of computers that arc so small, fast and
cheap that they have become ubiquitous.

Computer memory size has accelerated/gone up to over 2 GigaBytes in large

commercial machines, processing speeds having exceeded 200 MIPS.

1be fourth generation of computers has been instrumental in :

• Making possible/available extremely powerful Personal Computers (PCs) at
relatively lower costs.
• Spreading computers from offices to homes.
• Decentralizing computer organization.
• Making networks and distributed data processing a reality.
• Developing interactive graphic devices and language interfaces to graphic system.
• Providing impetus to CAD/CAM.
• Ushering in the 'Computer Culture'.

5. Fifth Generation

Fifth Generation computers are expected to use parallel processing and massively
parallel processing. They will be using artificial intelligence and intricate mathematical
models. They will be able to blend voice, images and massive data from various
sources.

35
 :vtanagcment lnfomu1tion Systems

Comparative Features

Detailed information as regards the comparative features ofthe five generations ofcomputers
is furnished hereafter.

Table 2.2 First Generation Computers

ComputcrCh aracteristics Trends and Development in

and Capabilities
. Computer Hardware

Room(Size) Vacuum Tubes

One Component per circuit (Density) Magnetic Drum (Main Memory)
- -· .
I Iundreds instructions per second Magnetic Drum, Magnetic Tape
(Speed) (Secondary Storage)
-
fFailure
_ o_f-ci-rc-uits in hours Punched Cards, Paper Tape
(Reliability) (Input media)
-
Thousands capacity in characters I Punched cards. Printed reports
(Memory) (Output Media)
-
Cost very high
L ___ _ __ I

Table 23 Second Generation Computers

Co mputer Characteristics Trends and Development in

an d Capabilities Computer Hardware

Closet(Size) Transistors
- - --
Hundreds components per circuit Magnetic Core (Main Memory)
(Density)

Thousands instructions per second Magnetic tape, magnetic disk

I
(Speed) , (Secondary storage)
I

Failure ofcircuits in days (Reliability) Punched Cards (Input Media)

-
Tcns ofthousands capacity in Punched cards, Printed reports (Output
characters (Memory) Media)
Cost slightly lower than the frrst generation.

36

......
 Unit 2 Information Technology

Table 2.4 Third Generation Computers

Computer Characteristics ~ends and Development in

and Capabilities Computer Hardware
- ---------------~

Disk size mini computer Integrated semi-conductor circuits

Thousands components per circuit l

I
Magnetic core

Millions instructions per second Magnetic Drum, Magnetic Tape

Failure ofcircuits in weeks Key to tape and disk (input media)

Hundreds ofthousands capacities Printed reports/video displays (output media)

Cost lower than second generation

j Table 2.5 Fourth Generation Computers

I Computer Characteristics Trends and Development in
j and Capabilities Computer Hardware
J Typewriter size micro computer Large Scale Integrated (LSI) semi
conductor circuits

Hundreds ofthousands of Magnetic disk, Floppy disk, Magnetic

components per circuit bubble optical disk.

Tens ofmillions instructions Keyboard data entry, Direct input

per second devices optical scanning.

Failure of code in months. Video displays, audio responses,

printed reports.

Hundreds ofthousands capacity in

characters.
- - - -- - - - - - - - - -- -- - - - - 1 - - - -

Cost lower than third generation

37
 Management Information Systems

Table 2.6 Fifth Generation Computers

Computer Characteristics fiends and Development

and Capabilities in Computer Hardware
-
Credit card sized micro-processor. Very Large Scale Integrated (VLSI)
semiconductor circuits.

Millions ofcomponents per circuit I Usc ofArtificial Intelligence

I - -- - - - - -

Billions/Trillions instructions per second. Speech input, tactical input

Failure of code in years. Graphics displays, voice responses.

Billions capacity in characters. Parallel and massively parallel

'------ - --- - ---+-- - --------- - -- -
Cost very low.

2.5 COMPUTER CATEGORIES

As seen earlier each generation is characterized I distinguished by application of a new

technology, related with the processing speed, processing capability, memory and utilities
among others. Just as computers differ in technology, computers also differ in terms ofsize
and processing speed/capability. It is based on these aspects that computers arc divided
into the following four categories:
1. Super Computer
2. Main Frame Computer
3. Mini Computer
4. Micro Computer

1. Super Computer

A super computer is a highly expensive, sophisticated and powerful machine with

huge primary storage. It is designed for applications requiring very high speed, extremely
rapid and complex computations involving hundreds or thousands ofvariables. Super
computers process instruction..c:; not one at a time in sequential mode, but in the Parallel
Processing mode.

38
Unit 2 Information Technology

The usc of super computers has been traditionally confined to scientific/military

research, weather forecasting and engineering applications, where complex
mathematical models and simulations have to be used. With the increasing complexity
ofbusiness due to globalization and competition, super computers are now being
increasingly used in business organizations as well. India has joined the select league
of Super Computer Nations with launching and commissioning ofPARAM Super
Computer developed by C-DAC under the able leadership ofPadmashri Dr. Vijay
Bhatkar.

2. Mainframe Computer

A mainframe computer has very powerful CPU, highly sophisticated operating system
and very large secondary storage capabilities. "It is a powerhouse with massive memory
and extremely rapid processing speed/ability. It is used for very large commercial,
scientific or military applications where a computer must handle massive amounts of
data or many complicated processes. A mainframe can support multiple jobs being
executed concurrently and on line processing from many remote locations at once."

3. Mini Computer

A mini computer is a middle range computer, less than the size ofan office desk, and
relatively less expensive. It may support on line processing from multiple remote
locations. It is often used in major academic institutions, universities, factories or
research laboratories.

4. Micro Computer

A micro computer, often te1mcd as, or considered synonymous with, a Personal

Computer (PC), is very compact, small computing machine. A micro-computer could
be easily carried from one place to another and is used as personal machine as well
as in office/workplace and business.

A micro computer was originally conceived as and intended to be, primarily a personal
and single user machine. As such, it had a simple operating system, small primary
storage, mostly one input unit (visual display unit- terminal or monitor), an output
unit-mostly a small printer and limited secondary storage by way of diskettes or
cassettes.

Today, however, a micro computer need not be a 'stand alone' machine. Today, it
can be used either as a 'stand alone' machine or can be hooked into/linked to other

39
 Management Information Systems

micros, telecommunications devices or larger computers. Micro computer can also

be integrated into, and made a part of, organil'.ation-wide network which shares
hardware, software and data resources.

2.6 SUMMARY
Information technology (IT) is a broad subject concerned with integration of
telecommunications and computer science tcchnolgies and other (l!)])CCts ofmanaging and
processing information, especially in large organil'.ations. IT deals with the usc of electronic
computers and computer software to convert, store, protect, process, transmit, and retrieve
information

A computer is an electronic device which accepts input, processes it according to a set of

instructions provided and generates the desired output. It operates on data . It can store,
process and retrieve data as and when desired. A computer system is a combination of
different elements like hardware, software, data/information.

The computer hardware consisl'\ of:- the CPU (central processing unit), Input Devices,
Output Devices, Storage Devices - Primary and Secondary, Physical media to link various
communication devices.

Computers are divided into the following four categories:- Super Computer, Main Frame
Computer, Mini Computer, Micro Computer

2.7 SELF-ASSESSMENT QUESTIONS

A. Answer the following questions

1. What do you mean by Information Technology?

2. Explain the impact oflnformation Technology on an organization.

3. What is a computer? Explain its characteristics.

4. What is computer hardware? Explain the various components ofhardware.

5. Briefly explain generations of computers along with its comparisons.

6. Explain different categories ofcomputers.

7. Distinguish between a compiler and an interpreter.

40
 Management Information Systems

3.1 lNTRODUCTIOl'l

A computer cannot do anything on its own. It must be instructed to do a desired job.

Hence, it is necessary to specify a sequence of instructions, which a computer must perform
to solve a problem I perform a task . Such a sequence of instructions, written in a language,
which can be understood by a computer, is called a computer program

For the computer to function and deliver the processing results, we normally expect from
computer, there has to be appropriate software.

Software is a broad term given to "the instructions that direct the operation ofthe hardware".
Software could also be described as "the detailed instructions that control the operation of
a computer system".

A set ofinstructions for a specific task is called a "Routine" and a complete set of instructions
to execute a related set of tasks is termed as 'program'. Software instructions arc also
referred to as 'code'.

In this unit you will learn about Data Communication and IT Enabled Services. To
understand this we first need to have an idea about Software.

3.2 FUNCTIONS AND CATEGORIES OF SOFTWARE

Software functions could be described as follows :

1. Manage the computer resources of the organization.
2. Provide tools for human beings to take advantage of these resources.
3. Act as an intermediary between organizations and stored information.

Software Categories
Computer software could be broadly divided into two major categories:
System Software and Application Software
1. System Software

System software is a set of generalized programs that manage the resources of the
computers, such as the central processor, communication links and peripheral devices.
Thesystemsoftwarcisinstrumcntal inco-coordinatingthe various parts of the
computer system and mediating between application software(s/w) and computer
hardware (h/w).

44
Unit 3 Data Communication and IT Enabled Services

System soflware consists of:

a. Operating systems
b. Language translators
c. Utilityprograms
d. Communication Software
System software, being generally machine specific, is usually purchased along with
the hardware rather than developed by internal personnel. The system software
surrounds and controls access to the hardware as indicated in the ensuing illustration.

a. Operating System
Operating system is like the ChiefExecutive. The operating system oftwarc
decides which computer resources will be used, which programs will be run,
and the sequence/order in which activities will take place.
The operating system, as stated earlier, takes care of allocation I assignment of
computer resources, scheduling the jobs/events/tasks and monitors the activities
ofthe computer system.
The device on which a complete operating system is stored is called the System
Residence Device. The operating system currently possesses multi-programming,
multi-tasking, virtual storage, time sharing and multi-processing capabilities. Refer
to Fig. 3.1.
Programming Languages
Assembly/Machine Language
Third/Fourth Generation Languages

Application Software

System Software
Fig. 3.1 Software Categories

45
 Management Information Systems

b. Language Translation

The computer programs are written in higher level programming languages like
COBOL, FORTRAN, C etc. These 'Source Code' programs which are 'Human
Readable' must be converted into 'Object Code'- computer readable languages.
System software includes special programs, which translate the higher level
language programs into machine language, which the computer can execute.
This type of system software is called 'compiler' or 'interpreter'.

A compiler translates source code into machine code called object code. An
interpreter translates each source code statement, one at a time, into machine
code.

An assembler is similar to a compiler but is used to translate only Assembly

Language into machine code.

c. Utility Programs

Also known as utilities , they help users in system maintenance task and in
performing tasks ofroutine nature like sorting, listing etc and managing data like
creating files, merging files).

Utility programs are pre-written programs which arc stored so that they can be
shared by all users of a computer system and can be readily used in many
different information system applications where so required I requested.

d Communications Software

Enables transfer of data /programs from one computer system to another in a

network environment where multiple computer are interconnected

PS Activicy_B_;.
In a computer , hardware and software both are essential and they complement each
other. Do you agree with this statement? Justify your answers.

46
Unit 3 Data Communication and IT Enabled Services

Leading Microcomputer Operating Systems

The DOS, Windows 95, Windows NT, OS/2, UNIX!XENIX LINUX and System 7 arc
considered the leading micro-computer operating systems. Refer to Table 3 .1.

Table 3.1 Operating Systems and their features

,--------------.--------------------------------------------,
Operating System Brief Details/Features
DOS A command-driven operating system for mainly 16-bit micro
computer. PC-DOS for IBM andMS-DOS tor IBM Compatible
microcomputer. Most popu1ar operating system. Does not allow
mu1ti-tasking. Memory limitations.
~-------------r--
Windows95 32 bit operating system. Faster to operate. Provides a streamlined
GUI. Supports multi-tasking, multi-threading (ability to manage
multiple independent tasks simultaneously) and powerful
networking capabilities, including capability to integrate fax, e-
mail and scheduling programs.
- - -- - -
WindowsNT Provides GUI. Has move powerful multitasking and memory
management capability. I
32 bit operating system for microcomputer. Not tied to computer
hardware based on Intel micro-processors alone. Can provide j
mainframe-like computer power for new applications with massive 1
memory and file management requirements.
--
OS/2 Operating Is robust operating system used with 32 bit IBM Personal System/
Systcm/2 2 micro-computer or IBM-Compatible micro-computers. OS/
2 supports multi-tasking, accommodates larger applications,
allows applications to be run simu1taneously, supports networked
multimedia and pen computing applications. A macro protected
system has its own GUI. Supports DOS applications and can
run Windows and DOS applications at the same time in its own
resi:r.ablc windows. I
f-.-- --
UNIX Developed by Bell Laboratories in 1969. An interactive, multi-
user, multi-tasking operating system. Highly supportive of
communications and networking. Can run on many di1fercnt kinds
of computers and can be easily customized. Powerful but
considered to be complex.

LINUX I:~~s is a freely available operating system. It is now reported

-.J..::.tiBM would be installing this system on their machines.
k__________ - ---

47
 Management Information Systems

Windows 2000 It is Microsoft's operating system launched in 2000.

Other operations systems arc Windows XP, Windows Vista

2. Application Software

Application software includes computer programs written for a specific

application for an individual organi7.ations. Application software is primarily
concerned with accomplisrung the tasks of end users.

Application software is developed by in-house personnel or out.c;;idc software

professionals. As such, many different programming languages can be used for
developing applications software. A few examples ofapplication software are
word processing software, spreadsheet software, database software, graprucal
software, entertainment software etc.

Relation between hardware and software

1. Both arc necessary for the computer to do useful jobs, they are complementary
to each other.
2. Same hardware can have different software's to make the computer system
perfonn different types ofjob.
3. Except for upgrade, hardware is normally one time cost, whereas software cost
can be recurring

RS Activity C :
Application software is user specific. Explain

3.3 DATA COMMUNICATION

Communication is transfer ofinformation from one person to another. It is a way ofreaching

others by transmitting ideas/facts/thoughts/feelings/attitudes and values.

48
 Cnit 3 Data Communication and IT Enabled Services

Data Communication, however, is somewhat different from communication. Data

communication is specific in the context ofthe Computer-based Management Information
System.

Data Cmmmmication consists of:

• Data Processing, and
• Data Transmission

Data Processing

Data is uns1ructured raw facts in isolation to be used as the raw material o:llfor the information
system. Data is also the glue or mortar ofthe information system.

Data could be expressed in numeric, alphabetic, alphanumeric, special characters, images,

symbols or even voice. The various forms of data expressions arc understood by the
computer as strings of'O' or 1'. The computer works with electrical pulse ofT or on, which
state is equivalent to 'Off and 'On' representing '0' and '1'. The '0' and 1' arc known as
Binary Digits or BITS. The computer uses strings made in combination of'zeros' and
'ones' to move, store and compute the data.

Data Organization/Sequence

The data is moved, stored and computed in the unit of bytes. One byte represents one
character. The byte is made of eight bits. The data is structured for processing in a certain
sequence and is ultimately stored in file.
• The Bits form a Byte.
• The Byte represents Character.

• A number of Characters forms a Field.

• Fields constitute a Record.
• Records constitute a Block.
• Blocks constitute a File.

• Files constitute a Database.

Thus, the data hierarchy can be represented as. Refer to Fig. 3.2.
g

49
 Management Information Systems

I Database I
-t
~ FilC J
t -
Blocks ]

Fig. 3.2 Data Hierarchy

Data Processing
I

Data Processing involves a number of operations, similar to those in a manufacturing unit,

to convert the basic raw material - data - into a finished product- Information. The typical
data processing steps would include, among others, following activities. Refer to
Table3.2.

Table 3.2 Data Processing Steps

Read Sort
I Collate
- cl
I
Compare
I
Store
I
Write Merge Delete I Decide Display
I
I ! ! - - -
J
Hrint Copy I Enter Compute Etc.
- -
Plot Transfer I
I
Create Perform
i
Data processing also involves carrying out a number of data operations. To illustrate this
refer to Table 3.3.

50
Unit 3 Data Communication and IT Enabled Services

Table 3.3 Data Operations

Operation I Brief Details

I

r- ·-
Capturing Recording of data from an event/transaction
VerifYing Checking/validating data for correctness.
t - -·
ClassifYing Placing data into specific categories.
·-
r-sortinglArranging Placing data in a particular sequence.
~--

Summarizing Combining/aggregating data elements.

Calculating Arithmetic/logical computations.
Storing Placing data to some storage media.
r---·- - ·-
Retrieving Searching out and gaining access to specific data elements.
Reproducing Duplicating data from one medium to another.
Disseminating/ I Transferring data from one place to anothcr(deviee- to- user)
1

Communicating
t___

Data Processing can be stmunarized as shown in the diagram which follows. Refer to
Fig. 3.3.
I __ _D_a_ta Collection
- - - +
L._
- - -- + Data Collation I
I
~--

[
.
Data Conversion
+ =:J
Data Written m-=D=-o_c_um--en_,.ts-·~
--
L_Data in Ma~hine Readable Form J
C: InputUnit I
,____ Memory
+ CPU =:J
--------,
Processed Data in Internal Form

L •
Output Unit

~ta Transformed to a readable~

Fig. 3.3 Data Processing Steps

51
 Management Information Systems

Data Processing and Transactions

What data processing basically docs, is Transaction Processing. Ifthere is no transaction,

there would not be any data/document generated and hence no need for data processing.
Let us, therefore, remember that 'Transaction is a fundamental organizational function'.

A business is conducted through the business transactions, which are recorded systematically.
A sales order accepted by a sales person, a purchase order issued, a reservation, money
being deposited in or withdrawn from bank arc all examples ofBusiness Transactions
which arc recorded and then processed. Ifthere are no transactions, no data/document
and hence no need for data processing either.

Transaction Processing

The transaction processing system is vital for organinttional operations. Without it, bills
would not be paid, purchase orders would not be issued, sales orders would not be
placed, reservations would not be made.

However, before processing a transaction, the relative data item has to be checked, verified
and found correct/acceptable as regards its quality specification. This process is called
Data Validation. This process is effected by using a set of computer software programs,
known as the Validation Programs, where certain data validation tests are applied to the
data items. Validation tests may check any/all ofthe following attributes/aspects. Refer to
Table 3.4.

Table 3.4 Validation Tests

Validation Test Remarks

Missing Data It is a test for verifying the existence of data item. Ifthe required
data is missing, it has to be obtained to complete data processing
to ensure complete coverage oftransactions.
Valid Size It is a test for checking the size/length ofa data item. The test will
enable to exclude items with too few or too many characters.
Class or The data will belong to a particular class/type e.g. numeric,
composition alphanumeric etc. The test ensures that the data item contains/
belongs to the pre-determined class/composition.
Range or The test checks for values that fall in the acceptable range or are
Reasonableness reasonable for the type oftransaction.

52
Unit 3 Data Communication and IT Enabled Services

Invalid Value An item can be checked to see if it is in the valid set of valid
values.
Comparison with The test compares the data on hand with data in the file to ascertain
stored data its correctness.
Check digit It is a test, which is very effective in locating/finding out input errors.

The Relevance of Transaction Processing

Transaction processing has relevance for the following three reasons :

1. Information
2. Action
3. Investigational

Transactions, when processed, lead to providing/generating of information. Reporting,

confirming or explaining proposed or completed action is important from the 'Informational'
aspect.

Action documents include documents such as purchase order, requisition slips, shipping
orders etc. These documents instruct someone to do something and lead to initiation of
certain action.

The 'Investigational' part of transaction processing is relevant for ensuring background

information reference or cross checking by the recipient.

3.4 DATA PROCESSING MODES

As stated earlier, computers are used for the processing of data, analyzing it and getting
the necessary information for facilitating decision-making. It is, therefore, imperative that
the data be processed in keeping with the specific needs, demands and requircmentc; of
the organization. It would not be out ofplace to state that demands ofthe business determine
the type of data processing modes/methods. Broadly, there are four different methods
used for data processing and updating as illustrated hereafter. Refer to Fig. 3 .4.

53
 Management Information Systems

.-----:-r-
Batchl I OnLine l
r-~
Real11me jnis_tn_,_.b_u-ted
-
Proccs~~ j Processing 1 Processing l_!~ocessing

Fig. 3.4 Data Processing

1. Batch Processing System

This was the only method of data processing until the early 1960s, as technical
limitations required that periodic data preparation and periodic batch processing be
utilized. This system, however, continues to be used till date in older systems or in
those systems where massive volumes ofperiodic transactions are involved. Refer
to Fig. 3.5.

Transactions
Grouped in
Batches

Validate
&
Update

Fig. 3.5 Batch Processing

Batch processing involves the accumulation/storage of information in a group or batch

till such a time when, because of some reporting cycle, it is efficient or necessary to
process them. Batch processing of transactions can be very efficient in terms of data

54
 Unit 3 Data Communication and IT Enabled Services

preparation and processing of transactions, especially when they are processed

against a sequential file.

In batch system.c;;, transactions are accumulated in a transaction file which contains all
the transactions for a particular time period. This transaction file is periodically used
to update the master file, which contains permanent information on entities. Adding
the transaction data to the existing/current master file, creates a new master file.

While batch processing may be useful in enhancing control oftransaction processing,

it must be remembered that one major disadvantage of periodic batch processing is
the delay in detecting and correcting errors.

2. On-Line Processing System

The On-Line Processing System of transactions has now become a way oflife. In
this system, the user has access to a terminal for input oftransactions and output
of results. The user enters transactions into a device that is directly connected to
the computer system. The transaction is taken for processing directly and is validated
immediately before being taken up for further processing. After validation, the data is
accepted but processing itselfmay be performed either immediately or at a subsequent
time.

For online processing the flies must be available on direct access storage devices for
immediate access to the data, so that records could be added to or deleted from the
file. Thus, in on line processing, the processing ofdata- from input to computation
and updation of status on various files is carried out immediately. Refer to Fig. 3.6.

Trans actions

Process/ Master
d ireclly via Upd ate File
keyboard m aster file

immed iate Immediate Immediate

In put Proces s ing File Update

Fig. 3.6 On Line Processing

55
 Management Information Systems

However, a user responsible for processing data in an on line system must ensure
proper security protocol- he must sign on properly, enter transactions in the proper,
laid down format, respond to error messages with corrected input, review control
information and sign offafter the transaction processing is complete, to prevent
unauthorised use/access.

3. On Line Real Time Processing System

The on line real time processing system is similar to the on line processing system
in as much as in both the systems, a transaction is entered directly into the computer
and validated immediately. However, while under the online system, the transaction
may be processed later, under the on-line real time p rocessing system, once a
transaction is found to be valid, it is processed immediately and the results are also
made available immediately, as the master data is always up-to-date.

Needless to add, the real time processing concept is used where stored data needs
to be updated simultaneously as the transaction takes place.

The points to be considered arc the higher costs of on line processing, requiring
greater computer power and often data communication, as also the extra procedures
required to produce adequate control information and to safeguard the files against
accidental or deliberate destruction during on line updating.

A schematic representation oftwo alternatives for on line direct entry is illustrated in

Fig. 3.7.

Original
Entry & Proces s
Error Immediately
Corrections
Error Messages
Fig. 3. 7 Online Entry with Immediate Processing

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l ::it 3 Data Communication and IT Enabled Services

-t Distributed Data Processing

The distributed data processing mode became popular during the 1970s, as this
period witnessed the growth ofpowerful telecommunications networks and also the
developments in computer technologies leading to significant decline in computer
hardware prices/costs.

The distributed data processing refers to the distribution of computer processing among
geographically and functionally multiple locations, linked by communications network. The
distributed data processing mode enables to serve multiple real time applications as also
serves multiple classes ofusers. Instead of relying on a single centralized/ mainframe
computer system to provide service to remote sites, the distributed processors directly
serve regional/local unit<;/establishn1ents. These processors, in turn, are linked with
each other by networks.

The distributed data processing system provides the advantages of increased system
availability and quicker systems response time. Systems availability is increased because
when CPU malfunctions or undergoes preventive maintenance, its work may be transferred
to another CPU in the system. The response time is improved because the workload can
be distributed evenly among the CPUs to ensure optimum utilization.

2SActivity D:
Give examples ofonline processing and onLine real time processing

Other Data Processing Modes

In addition to the batch processing, online processing, real time processing and the distributed
data processing modes, there arc some other modes which arc/can be used for data
processing. These modes are based on the capability ofthe operating system. Such data
processing modes are :
1. Time Sharing
2. Multi Programming
3. Multi Processing

57
 Management Information Systems

Let us briefly discuss these three data processing modes.

1. Time Sharing

The time sharing mode of data processing allows several users to simultaneously
share the processing capability ofthe computer system. Under this mode, each user
is allotted a certain 'Time Slot' or 'Time Slice,' dming which that particular user has
access to Processor. The Processor spends this allotted time on one program before
moving over to another. This activity is reiterated till the user's task is finally completed.
The users ofthe system generally avail the facility oftime sharing a computer system
through remote terminals.

2. Multi Processing

Multi-processing is a capability ofthe operating system. It enables linking together

two or more CPUs to work in parallel in a single computer system. The tasks envisaged
to be carried out, arc divided between the CPus, leading to simultaneous execution
oftwo or more processing units, which arc part ofthe same system. This is possible
as each processor shares access to it<; main memory with the other processor. Thus,
multi-processing uses simultaneous processing with CPtJs.

3. Multi-Programming

Multi-programming is one ofthe most important capability ofthe operating system,

used for sharing computer resources and facilitating data processing. Multi-
programming allows multiple programs to share a computer systems resources at
any one time through concurrent usc of CPU, thereby also enabling higher CPU
utilization. Ylulti-programming enables a group of programs take turns, using the
CPU. To illustrate, in the multi-programming mode, a number ofprograms are there
in the memory and also, a number ofjobs will be in a queue waiting to be processed.
When one ofthe jobs in memory is finished, another job is taken from the queue of
jobs and put into the main memory for execution.

It has, however, to be remembered that multi-programming and multi-processing arc

different in as much a<; while multi-programming uses concunent processing with
the single Cl)U, multi-processing uses sinmltancous processing with multiple CPUs.

58
L'nit 3 Data Communication and IT Enabled Services

3.5 DATA TRA..."'lSMISSIOl\"

Data Transmission necessarily uses the data processed for forwarding the same to the end
llSer. Data transmission, however, may simply involve forwarding ofthe data to the end
user. Whatever the case may be, data transmission could not be effected without using the
means provided by the advances in the telecommunication field I technology.

Data communication, which consists of data processing as well as data transmission,

;merally requires the following :
l. Transmitter (Source ofInformation)
Converter at Transmitting End
3. Transmission ChanneVCarrier
4. ConverterattheReceivingEnd
5. Receiver (oftransmitted infom1ation).

Transmission Signals :

The data is transmitted using the telecommunication systems. The data is transmitted in the
torm ofelectromagnetic signals. These signals can be of two types:
I. The Analog Signal
The Digital Signal

1. The Analog Signal

It is a continuous wave form that passes through the communication medium. Analog
signals are, rather were, used mainly to transmit data in the form of voice and to reflect
Yariations in the pitch, across the line. The analog signal is in the form ofwaves of different
frequencies and subject to distortion.

The wave form has three characteristics :

l. Amplitude (Strength of Signal)
)
Phase (Direction of'flow' ofthe signal in a cycle time)
3. Frequency (number oftimes the wave form is repeated during a specified interval)

59
 Management Information Systems

These characteristics are illustrated as follows. Refer to Fig. 3.8.

o1111 Frequency ..,

r
Amplitude

Fig. 3.8 Analog Signal

2. The Digital Signal

It is a discrete wave form that transmits data coded into two discrete states as 1 -bits and
0- bits, which arc represented as On-Off electrical pulses. Digital signal is very useful in
data communications. Now we are, indeed, moving into the "Digital Era" using the digital
signal.

The Digital Signal is generated by micro-processor based- or controlled-device. The

Digital signal has identical strength from source to destination. It is clear, rapid and distortion-
free (less prone to noise distortion). The digital signal is illustrated as follows. Refer to
Fig. 3.9.
l 1 1 1

0 0 0 0 0
Fig. 3.9 Digital Signal

Modem : Modem is an abbreviation ofMOdulation/DEModulation. A modem is a device

that performs the translation from analog to digital or from digital to analog fmm ofsignal.
The functions ofthe modem are illustrated as follows. Refer to Fig. 3.10.
Dtgital
Digital

Hg. 3.10 Modem

60
t:nit 3 Data Communication and IT Enabled Services

Communication!fransmission Channels

Communication channels are the links/means by which data are transmitted from one
device in a network to another, A channel can make use of various media like :

L Physical Connection Lines

a. Twisted Pair of Copper Wires
b. Coaxial Cables
c. Optical Fiber

"> Micro Wave I .ines

a. "Line of Sight" earth micro wave (tower to tower)
b. Radio/Wireless transmission waves (AM/FM)
c. Satellite

Characteristics of Communication Channels

The communication channels, mentioned earlier, have the following characteristics:

I. Transmission Speed : It is the total amount of information that can be transmitted

through any telecommunication channel and is measured in Bits Per Second (BPS).
This speed is sometimes also refened to as 'Baud Rate'.

2. Bandwidth : It is the capacity of the communications channel as measured by the

difference between the highest and the lowest frequencies that can be transmitted by
that channel.

3. Transmission Modes : Transmission could be effected in different modes viz

Asynchronous Transmission and Synchronous Transmission. In asynchronous
transmission, one character is transmitted at a time and is generally used for low
speed transmission. In synchronous transmission, a group ofcharacters is transmitted
simultaneously. It is generally used for high speed transmission ofblock ofcharacters.

4. Transmission Direction : The data can be transmitted in different direction using

Simplex, HalfDuplex or Full Duplex transmission. While in simplex transmission,
data can travel only in one direction at all times, in halfduplex transmission, data can
travel/flow both ways, although it can travel in only one direction at a time. In full
duplex transmission, data can be directed/sent in either directions, simultaneously.

61
 Management Information Systems

5. Communication Processors : Data transmission and reception in a telecommunication

network requires various processors. Some of them are illustrated hereafter:

a. Front End Processors : It is a small computer dedicated to communication

management and generally attached to the main/host computer. It performs special
processing activities like formatting, editing, routing, etc. related to
communication.

b. Concentrator: It is a programmable computer which collects messages from

terminals and stores them till a bunch ofmessages- an economic size- is available.
These messages are then sent together ("Burst") to the host computer.

c. Controller: It is generally a specialized computer which supervises communication

traffic between the CPU and peripheral devices.

d. Multiplexer: It is a device which enables a single communication channel to

carry data transmissions from multiple sources, simultaneously.

e. Telecommunication Software : The software resides in the host computer, front

end processor and other processors of a network. The special software is
required to control and support the activities ofthe telecommunication network.

Network control, access control, transmission control, error detection/correction and

security are some ofthe major functions of the telecommunication software.

3.6 NETWORK

The changes and developments in Computer Science and Telecommunications and the
connectivity which has been made possible, in turn, gave rise to the Networks, which have
now become a routine.

Computers and Telephone, along with the Industrial Revolution and Automobile, have and
are changing the way business will be done. In the twentieth century, in particular,
telecommunication and computers have changed dreams into reality. The development of
powerful microprocessors and telecommunication networks ha-; forced the emergence of
a new information architecture based on multi-tasking, multi-programming utilities of
computers and digitized communication networks.

The technological advances in computer science and telecommunication, coupled with

globalization ofcorporate activities, necessitated effective networking facilities, for ensuring

62
Cnit 3 Data Communication and [T Enabled Services

effective and efficient functioning/management oforganizations. The networks now enable

the business organi:t.ations to communicate with practically everybody- be it customers or
vendors or competitors or outside database sources -on a global and almost on line real
time basis.

Computer Network, according to the Information Technology Act, 2002, means

"'interconnection of one or more computers through use of satellite, microwave, terrestrial
line or other communication media, and terminals or a complex consisting oftwo or more
interconnected computers, whether or not the inter-conn<..>etion is continuously maintained".

Computer Networking is the process of providing connectivity between/among two or

more computers/computer systems to enable users to communicate with each other, share
hardware/software resources and not get constricted by the stand-alone systems.

:Setworks and Networking have gained currency as they offer the following advantages :
1. Networks enable users to share resources- hardware, software, peripherals etc.
"> Networks facilitate simultaneous access to the data file by multiple users, thereby,
enabling them to share the data files.
3. Networks facilitate almost instantaneous communication between users.
-t.. Networks facilitate decentralized data processing.

A Network is made possible or functional due to the following constituents:

1. Node : It is an end point in a computer network.
' Access Path : It is a connection between the two end-users that allows them to
communicate.
3. Protocol: The rules established to govern the way that data arc transmitted in a
computer network.

A network typically contains diverse hardware and software components that need
to work together to transmit/receive information. Different components in a network
can communicate by adhering to a common set of rules that enable them to 'talk' to
each other. This set of rules and procedures governing transmission between two
points in a network is called Protocol. Each device in a network must be able to
interpret the other device's protocol.

-t.. File Server : It is a computer in a network that stores various programmes and data
files for users of network. It also determines access and availability in the network.

63
 Management Infonnation Systems

5. Network Operating System : It is a special software which manages the file server in
a network and routes and manages communications on the network.

6. Gateway : It helps connect dissimilar networks by providing the translation from one
set ofprotocols to another and permit'i the computers ofdifferent design/architectures
to communicate with one another.

Network Topologies

Networks are formed from the interconnection ofa number of different locations by using
telecommunication facilities. These facilities or components can be organized in various
ways to form a network.

Networks can be classified according to the geographical scope or area covered by services
provided and also by their share or topology.

The three most common network topologies arc :

1. The Star Topology
2. The Bus Topology
3. The Ring Topology

1. The Star Network

This network tics all the units to a central host/hub computer. All communications
between units/terminals in the network must necessarily pass through the central
computer. The central computer, thus, acts as a traffic controller for the units/terminals
in the star network.

The central computer of the star network can be part ofthe larger hierarchical network
where the host/hub can be connected upward, providing eventual linking to a mainframe
computer in the corporate office.

The star network, however, is considered to be vulnerable in view ofthe fact that if
the central host/hub computer goes down (becomes inoperable) the total network/
system would also go down (become inoperable) and stop functioning.Refer to
Fig.3.11.

64
l"nit 3 Data Communication and IT Enahlec Services

Computer 1

Computer2

Host
CPU
Printer

Terminal 2
Terrnina13
:Fig. 3.11 Star Network

2. The Bus Network

The Bus Network is basically a peer-to-peer network. It links a number of computers

by a single circuit. There is no central host/hub computer to control the network. All
the signals are transmitted to the total network, with special software to help identify
which component-; receive each message.

As such, the Bus Network is never affected totally and is not vulnerable, like the Star
Network. This is because even ifone ofthe computer in the Bus Network becomes
inoperable or stops functioning, the remaining network remains unaffected. Refer to
Fig. 3.12.

Computer l
~
'~ Printer

Computcr 2 Terminal Computcr4

Fig. 3.12 Bus ~etwork

65
 ~auagcmcnt Information Systems

3. The Ring Network

In the Ring Network, the computers are arranged in a ring-like structure and data are
pac;sed along the ring from one computer to another in a uni-directional manner. Each
computer in the Ring Network can communicate directly with any other computer
and each processes its own applications/tasks independently or on its own. Refer to
Fig. 3.13.

Computer3

Printer

Fig. 3.13 Ring Network

Now, a variant ofthe ring network, known as Token Ring Network, is also available. In
this network, a "Token" is used by all the computers/devices connected for communicating.
The "Token' is a predefined packet ofdata indicating the sender, receiver and also indicating
whether the packet is in usc.

The Token Ring Network is considered to be more useful for transmitting large volumes of
data between microcomputers or for transmissions between microcomputer and larger
computer/s.

Types of Network

The various Network Types are as follows :

1. Local Area Network (LA~l

The LAN is a logical extension ofthe emergence ofthe personal computers. With the
onset of LAN, communication between PC users became a reality. PC users can
now transfer Jiles, send electronic mails and share peripherals, thanks to LAN.

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t:nit 3 Data Communication and IT Enabled Services

However, the performance ofLAN usually dewc:ldes as the area ofcoverage becomes
large as LA.l\ls arc typically small, with limited distance transmission and throughput
capacity.

LANs are used within buildings or campuses and are operated in geographically
specific location. A group ofminicomputers or other workstations/tenninal devices
located in the same general area are connected by a common cable (communication
circuit), so that they can exchange information, is known as a Local Area Network.

LANs arc totally controlled, maintained and operated by the end-users. LANs
generally have higher transmission capabilities and are desirable for organizations
requiring high volumes of data and high transmission speed. LAN"s enable the
organizations to share costly hardware and software and also promote productivity
as direct communication among users is possible without their being dependent upon
a centralized computer system.

A typical L.At"\1 can be illustrated as follows. Refer to Fig. 3.14.

LANs can also be connected to larger Backbone Network which allows message
transmission around the world.

2. Backbone Network

It is a large central net\vork in which everything within the organization is connected.

It usually is a network that interconnects everything on a single company site. It also
can be similar to a Metropolitan Area Network (MAN); but for a single organization
such as a company or university only. in which all the terminals, micro computers,
main frame, LA-:\s and other communication equipment~ are connected.

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 Management lnfonn ation Systems

3. Metropolitan Area Network (MAN)

A MAN represents LAN technology optimized for longer distances. It could, indeed,
be considered an extension ofLAN, as the MAN interconnects various buildings on
the entire campus or other facilities within a city/wide area. MAN is thus, ba.;;ically, a
network capable ofproviding high speed switched connectivity across distances typical
ofthosc found in metropolitan area and hence a MAN can be defined as "a network
spanning a geographical area that usually encompasses a city or country area".

While, physically, a MA~ consists of a transmission medium and nodes that provide
customer access to the medium, the major advantages ofMAN arc high bandwidth,
low delay and high transmission quality.

MANs arc expected to support several 'tra.ffic' types. Typical MAl~ traffic is expected
to include:
• LAN Interconnection
•
• Connections between PCs/Terrninals/Workstations to mainframes or hosts
• Graphics and Digital Images
• Bulk Data Transfer
• Digitized Voice
• Compressed Video
• Conventional Terminal Traffic

4. Wide Area Network (WAN)

The Wide Area Network (WAN) is a network spanning a large geographical area.
Its micro-computer (nodes) can span cities, states or even national/continental
boundaries. This network interconnects data transmission facilities not only on a nation-
wide but worldwide basis. WANs may consist of a combination of switched lines,
dedicated lines, microwave links and satellite communications.

5. Value Added Network (VAtV)

The Value Added Network (VAN) is a new but distinct trend emerging in the
networking area. The 'value' added is "the extra value added to communications by
the telecommunication and computing services", these networks provide to the user-
clients. Clients do not have to invest in network hardware and software. It is also not

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Unit 3 Data Communication and IT Enabled Services

necessary for them to perform their own error checking, editing, routing and protocol
conversion.

VANs are private, multi-path, data-only and third party managed petworks that can
provide economics in the cost of service and in network management. The VANs
can be used by multiple organizations on a subscription basis and hence VANs are
useful/beneficial for firms which provide special services, as VANs help in reducing
costs and operational problems related with networks.

~ etwork Considerations

TT.rule networks do facilitate intra/inter organizational communication, the key issues to be

3ddressed while implementing networking include :
• Human factors
• Cost
• Security
• Reliability
• Network Management
• Compatibility with current/future networks

£S Ac.ti.Yicy E :
a) What type ofNetwork Topology is being used in your computer laboratory and
why?

b) What is the difference between a Broad Band Connection and Dialup Connection?

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 Management Information Systems

3.7 INTERNET
The Internet is different things to different people. To some. Internet is a collection of
networks -literally an inter-network. To some others, Internet is a collection of servers
connected by common protocols and agreed upon standards. Notwithstanding the different
perceptions, the fact remains that, today, Internet has emerged as an electronic medium
that can no longer be ignored, particularly when it is fast converting the 'Citizens' into
'Netizens'.

To put it simply and succinctly, Internet is the global connection between computers that
allows individuals to send e-mail, make travel bookings, order books etc. between people
and companies all around the world. Internet is a worldwide network of computers holding
vast quantities of data that the user can access directly from a Personal ('.,omputer. Internet
has emerged as the single largest "Information Superhighway" in the world.

Internet is commonly referred to as "The network of the networks". The Internet (with the
capital "I") is a public resource. It means that any user or server on the Internet can
connect to any other user or server. No one "owns" the Internet, and this feature gives
individual and cotporate organizations tremendous capabilities. Internet has proved to be
powerful tool for corporates in particular as it helps, inter alia, bring in customers, generate
revenue and save money.

The Internet Evolution

It must, however, be remembered that the growth oflnternct has been more evolutionary
than planned, driven by necessity.

The 1950s and 1960s saw the birth and infancy ofthe networks that were to become the
Internet. The 1970s saw the Internet grow through its youth into an international network
presence. The 1970s also saw the introduction of store-and-forward technology and the
usc of e-mail, albeit on a limited and restricted scale. The 1980s was a significant decade
for Internet. It was during this period that the network grew to adulthood, poised for the
explosive and exponential growth ofthe 1990s.

The 1990s witnessed the explosive growth and commercialization ofinternet. One of the
most significant developments as regards Internet during the 1990s, 1991 to be more
specific, has been the release ofwww or W3 or more popularly the World Wide Web-
by CERN.

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Cnit 3 Data Communication and IT Enabled Services

The WWW project, which was originally developed to provide a distributed hypermedia
system that could easily access information from around the world from any desktop
computer, bas now evolved into a graphic medium that has effectively contributed to the
explosive, indeed exponential, growth ofthe internet during 1990s.

\Vbat Made Internet Possible?

Internet - the co-operative inter-connection ofnetworks - has been possible mainly due to
four factors as follows :
• Under-sea cables
• Satellites
• Telecommunication Technology and Standards
• The Computer itself

Internet Capabilities
Let us now note the major Internet capabilities and the functions which they support.
Refer to Table 3.5.
Table 3.5 Capabilities of the internet

Capability Functions Supported

--
E-mail Person-to-person messaging, document sharing
Uscnct Networking Discussion groups on electronic bulletin boards
~

Chatting Interactive conversation

TclNct Log on to one computer system and do work an another
- - -- . -
Gophers Locate textual information using a hierarchy ofmenus
Archie Search database ofdocuments, software and data files available
for downloading
WAIS (Wide Area Locate files in databases using keywords
Information Services)
World Wide Web Retrieve, format and display information (including text, audio,
graphics, video) using hypertext links.
I

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 \1anagcment Information Systems

Internet and the Business Organizations

The development, expansion and the popularity of the Internet left many business
organizations scrambling to define a new paradigm in computing - the network- centric
computing. The business organizations have realized that the Internet is a rich source of
tools and information and has enormous potential.

Some ofthc major benefits emanating from Internet and also certain problems arising!
likely to arise because oflnternet are summarized as follows: -

Internet Benefits
• Reducing communication costs
• Enhancing communication and co-ordination
• Accelerating the distribution ofknowlcdge
• Improving customer service and satisfaction
• Facilitating marketing and sales

Internet Problems

• Security
• Technology Problems
• Lack of Standards
• Legal Issues
• The traditional internet culture

The Intranet

Over the years, the Internet, which is basically network of networks, has also led to the
development of"Jntranet". The Intranet is not really the Internet, but the application of
internet technologies to the internal corporate network. The TCPIIP Internet Protocols, as
well as the standard systems of the Internet such as FTP, e-mail, protocols and www
system arc now increasingly being used within networks that are commonly referred to as
"lntranets".

Thus, while the Internet is for public consumption, intrancts are for private use, mainly
confined to the users only within a given/specific orgar0.ation.

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· -nit 3 Data Communication and 1T Enabled Services

The Extranet

While the Internet is public, and an intranet is private, an extranet is essentially a hybrid of
the two : it is semi-private !

The contents of the extranet server are specifically designed for a very select group of
users/audience. Typically, the users/audience could be a company's suppliers, customers
or other business associates.

Integrated Services Digital Network (ISDN)

Prior to 1962, the worldwide telecommunications network was totally analog. Separate
pairs of wires were also required for each service like Voice, Data and Image Signal
Transmission.

In 1962, the world started down the digital road with the onset ofT-1 carrier. From that
point onward, the worldwide telecommunications network has continued to grow and
become more and more digitaL

In 1970s, the concept of integrated services -popularly known as the ISDN -was born.
ISDN stands for Integrated Services Digital Network and is considered to be "the final
step in which digital reaches customer premises/doorsteps, first on copper and then on
'fiber'".

ISDN is an international standard for transmitting voice data, image .and video to support
a wide range of services over the public telephone lines. ISDN is the result ofover a dozen
ofyears of efforts by communication experts, all over the world.ISDN was developed by
the CCITT (Consultative Committee on International Telegraphy and Telephony) in the
late 1970s. ISDN endeavors to bring the world into a new age ofinformation by integrating
ail current and emerging communications technologies into a single, world- wide network.
It is an international push to upgrade business into a single, world-wide network. It is an
international push to upgrade business and human communication, with all the convenience,
capability and economy that the current and emerging state-of-the-art technologies permit.

ISDN, being all-digital, allows user to achieve convenience, flexibility and economy by
way ofreduced costs, lower power conswnption and easy maintainability. It also provides
a variety ofdata communication services over a single telephone line. High utilization is
also achieved due to the integration ofmultiple connection types, services which arc provided
on one line from one source. ISDN, being digital, also offers increased clarity, accuracy
and speed. Refer to Fig. 3.15.

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 Management Information Systems

Wl A _\rl.
~· ISDN 1'-- - - - - - - - - - . ~

~dri:ll
Record Record

il J!! •
Fig. 3.15 ISDN Concept

ISDN : What does the future hold?

ISDN is fast emerging as a strategic weapon in global communication. ISDN has the
potential to provide LAN like services to a large, multi-site organizations.

ISDN is, therefore, expected to emerge as an 'Enabler' for "Enterprise Integration" in that
it would enable a business to organize it" resources so that it improves its ability to respond
quickly, coherently and consistently to the customer demands and thereby be more
competitive in worldwide markets.

lSD~ : The Limitation

It must, however, be noted that ISDN is not by itself a service but rather an interface to
existing and future services. [t promotes innovation and convergence of information
technology and telecommunications in open network structures.

3.8 I.T. El\"ABLED SERVICES

'BPO', 'CALL CENTRES', 'MEDICAL TRANSCRIPTION' and particularly the ITES

now seem to be the new 'craze', 'hot stuff, 'buzzword' or the 'new mantra' in LT. business
circles. After the I.T. services, and the Y2K boom, Information Technology Enabled Services
- lTES for short- have emerged as the single largest opportunity. Consequently, there has
been a spate of activity in this area during the past 3-4 years.

According to NASSCOM study, the ITES employed a total of 45,000 personnel during
1999-2000, 70,000 during 2000-2001 and over I ,00,000 as at March 2002.

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:.."nit 3 Data Communication and IT Enabled Services

Simultaneously, the revenue generated by the ITES has also gone up from Rs. 2,400
crores during 1999-2000 toRs. 4,100 crores during 2000-2001 and Rs. 7,100 erorcs
during2001-2002.

Further, while the ITES arc reported to have witnessed a growth of 67% during 2001-
2002, such services arc expected to grow at a rate of 65% during 2002-2003 . Such a
growth augurs well for ITES prospects and makes the projected revenues of US $ 17
billion by 2008, as projected by the McKinsey-NASSCOM Report, feasible. Further,
according to IT research firms like Gartner, the global BPO market was estimated to
touch US S 234 billion by 2005. ($ 1 billion= Rs. 5000 crores approx.)

The ITES thus present India with a huge opportunity. It is interesting to note that 90% of
all India-based ITES activities have been concentrated in 9 cities - the ITES "Nav-ratnas"
(Nine Jewels), so to speak. TheNaVTatnas, in order ofpresent concentration ofiTES, are
a.;; follows:
1. Hydembad
2. Kochi
3. Chennai
4. Kolkata
5. Ahmedabad
6. Bangalore
7. Mumbai
8. National Capital Region (NCR)
9. Pune

What is ITES?

In simple terms, ITES involve the offering of services from remote locations by harnessing
the power oflnformation Technology through telecommunications/data networks. IT
Enabled services (ITES), also called web enabled services or remote services or Tete-
working, covers the entire gamut of opcmtions which exploit information technology for
improving efficiency ofan organif.ation.

Alternatively, ITES could be considered to be business processes and services performed

or provided from a location different from that of their users or beneficiaries and are
delivered, using Information Technology, over telecom networks.

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 Management lnfonnation Systems

ITES could also be considered as another 'avatar ofBusiness Process Outsourcing (BPO).
BPO involves the complete trcillsfer ofa business process or function to an external service
provider who executes the transferred process or function.

Typically, Information Technology is leveraged extensively in canying out the function, and
more recently, the Off..c;hore Model has been used in providing cost-effective services.

For this reason, BPO is also referred to as an IT Enabled Service (ITES).

The important points to remember about BPO arc :

1. The transfer of ownership of the process to the Service provider/s.
2. Control is exercised by defining very clear Service Level Agrccmcntc;.

(SLAs that often include financial guarantees if the SLAs arc not met by the service
provider).

Such services could be offered domestically or to companies in other parts of the globe
either by a third party (OUTSOURCED PARTh"'ER) or a subsidiary ofthe client company
(REMOTE OPERATIONS or OUT-LOCATION).

The IT Enabled Services

Although the IT&<:; cover a number ofservices, the most high profile and most commonly
understood/heard services in the ITES area are the Call Centres, Medical Transc1iphon
Services and the GIS.

ITES, however, go much beyond these services and include, inter alia, services such as:
1. Animation
2. Business Process Outsourcing/Management
3. Back office operations (Credit card, payroll)
4. Collection services
5. Customer Care/Interaction Services
6. Data digitization
7. Digital content development
8. Legal databases
9. Market research

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Unit 3 Data Communication and IT Enabled Services

I 0. Remote education
11 . Transcription and translation services
12. Website services

Some ofthese services are briefly described hereafter.

1. Business Process Outsourcing and Management

Over the last few years, there has been a growing trend to outsource back ofiicc and
data processing operations. Organizations like Banks, Airlines, Financial Services
Companies, Insurance Companies require large-scale data processing and availability
of data to improve their decision-making capabilities. High speed datacom link<> have
made BPO possible and this type oflTES is expected to grow by leaps and bounds
in the years to come. Insurance Claims Processing, Credit Cards Processing arc
typical examples ofback office ITES.

2. Call Centers- (Customer Care/Interaction Centers)

As per industry estimates, there were more than 1,00,000 call centers world-wide
and this number was expected to go up to 3,00,000 by 2002-2003, employing
approximately 18 million personnel. By the year 2003, a sum of US S 66 billion was
expected to be spent on call centre services, the momentum being accelerated byE-
Commcrcc.

In India, too, the call centers have recorded a remarkable growth. GE Capital Services
was the early bird to sow seeds ofiTES in India in 1996. Now, while GE Capital
Services boasts ofthe largest call centre facilities with over 12,000 seats, HSBC,
ABN Amro, British Airways and Citigroup are among others who have set up or arc
setting up call centers in India.

3. Medical Transcription

Medical Transcription facilities enable swift and accurate transcription of medical

records dictated by doctors and other medical/health-care professionals. It actually
implies a method oftranslating the dictation which forms the basis ofproviding health
care in most of the Western countries, particularly the USA, into an appropriate
format. This format is then included in a medical record.

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 Management lnfonnation Systems

The sound tracks containing the prescription/treatment, dictated by doctors, are sent
through datacom lines to overseas organization which employ "medical
transcriptionists" who hear these recordings, transcript them into medical reports and
send them back, electronically, through datacom links/lines to the hospitals/clinics.

4. . Legal Databases

In every judicial system, the lawyers always look for 'precedents', past rulings/
judgments to support and build-up the cases on hands. To fulfil this requirement, the
job of preparing legal database is outsourced. The job basically involves working
closely with the solicitors finn/s to create a database oftheir existing records, indexing
on the basis ofvarious useful and commonly understood criteria, keeping track of
new documents generated/created and incorporating them into the legal databases
as per laid down norms/parameters.

5. Digital Content Development

This ITES caters to the needs of web sites management, production of content for
new media as Compact Disk, Digital Versatile Disk as we11 as for products of
convergent technologies such as internet-enabled TV.

6. Geographic/Global Information Service (GIS)

While the preliminary work in the field of GIS commenced in the late fifties, the first
GIS software was released in the seventies. The GIS, thus, has been around tor the
past 30 years. While earlier GIS Applications have been in Government and Utilities
companies, mostly for analy~:ing Census Data, GIS is now being increasingly utilized
by various business organif.ations, particularly in marketing, manufacturing, real estate
and logistics. The evolution ofGIS has, indeed, transformed and revolutionized the
ways in which planners, engineers and managers conduct geographical data
management and analysis.

In simple terms, GIS is a computer system capable ofassembling, storing, manipulating

and displaying geographically referenced information, i.e. data identified according
to their locations. GIS can also be considered to be a computer-based information
system used to digitally represent and analyze the geographic features present on the
earth's surface and the events that take place on it.

In technical parlance, GIS is an Infom1ation System (IS) designed to work with data
referenced by spatial/geographical co-ordinates. GIS technology integrates common

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nit 3 Data Communication and IT Enabled Services

database operations such as query and statistical analysis with the unique visualization
and geographic analysis benefits offered by maps.

These abilities distinguish GIS from other IS and make it valuable to a wide range of
public and private enterprises for explaining events, predicting outcomes and planning
strategies. GIS is, therefore, seen as a tool to assist in decision-making and management
of attributes that need to be analyzed spatially.

The four major activities of GIS can be summarized as follows:

1. The meac;urement ofnatural and human-made phenomenon and processes from

a spatial perspective, with emphasis on the three following properties :
(a) Elemenlc;
(b) Attributes
(c) Relationships

2. The storage ofmeasurements in digital form in a computer database with focus

on the following features :
(a) Points
(b) Lines
(c) Areas (Polygons)

3. The analysis of collected measurements to produce more data and to discover

new relationships by numerically manipulating and modeling different places of
data.

4. The depiction ofthe measured or analyzed data in some type ofdisplay in any of
the following commonly employed forms :
(a) Maps
(b) Graphs
(c) Lists
(d) Summary statistics

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 \1anagement Information Systems

GIS Applications

Some of the major GIS applications are in the areas of:

(a) Advertising
(b) Archeology
(c) Education (location of institutes etc.)
(d) Cartography (Map Making)
(e) Site selection (real estate, optimal railway route etc.)
(f) Election administration (locating ofbooths)
(g) Insurance
(h) Routing/Distribution Network
(i) Oil, Gas and mineral exploration
G) Wild Life (Endangered species)
(k) Government Agencies (Police)
0) Transportation and logistics
(m) Urban and Regional Planning
(n) l~mergency Response Planning

Why Outsource ITES?

With economic slowdown, the corporates - the MNCs in particular - were on a look out
to be cost-effective globally, to remain competitive and ensure survival. Outsourcing ITES
was considered a desirable option as :
1. Outsourcing ITES can help the MNCs save anywhere upto 30-50% ofthcir costs.
2. The increased speed ofchange, including changes in the Regulatory Environment,
forcing the MNCs to achieve greater efficiencies in their core processes (Telecom/
Utilities/Financial Services).
3. Rapidly improving telecom infrastructure, declining telecom costs and related
developments offered significant connectivity at low cost.

In addition to the above mentioned reasons, some ofthe otherreasons for outsourcing
ITES as indicated in a recent survey by Michael F. Corbett and Associates arc :

HO
Unit 3 Data Communication and IT Enabled Services

1. Need to create a variable cost structure.

2. Need to increase revenue.
3. Need to foster innovation.
4. Need to conserve capital.
5. Need to improve quality.
6. Need to increase speed to market.

Why Outsource ITES to India?

1. India has a proven track-record in IT Services worldwide.
2. I Iigh quality technical skills/knowledge talent available.
3. Large and low cost pool ofEnglish-speaking prospective employees.
4. "Value for Money" proposition.
5. Inherent strength in Mathematics and Computer Science Applications.
6. Pro-active and Facilitating Government Policies.
7. Technical Education infrastructure.
8. Improved basic infrastructure like telecom, bandwidth etc.
9. People factor- Lower costs
- Greater skills
- Iligherproductivity
- Easy and abundant availability.

Challenges to India in BPO/ITES

Till 1999, India was not considered as an "ideal destination for IT-enabled Services".
However, notwithstanding the snags, constraints and deficiencies, India was able to create
anew TTES industry, showing growth rates of 50% plus, even in times ofthe global slow
downs. While India has made great strides in ITES, it must be remembered that 90% ofall
India-based ITES activity has been concentrated in 9 "Nav-ratna" cities as stated earlier.

In the process, India has not only stolen a march over its competitors like China and
Philippines, in Asia, and Australia, Canada, Ireland, Mexico and New Zealand globally,
but bas emerged as a leader in ITES in her own right. India's ITES revenues are nearly five
times that ofthe nearest competitor.

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 Management Information Systems

India has to be constantly on her toes as the competitors cannot be taken for granted or
lightly. China, in fact, could not only emerge as a challenge but may pose a real threat once
she succeeds in propagating English language and further improves the infrastructure.

Any complacency, therefore, would be a sure-fire remedy for disaster, if not a catastrophe.

The Snags

The ITES in India £:'lee certain problems which need to be looked into and set right forthwith
on a top priority. Some of the problems are:
1. Relatively Poor Quality ofbasic infrastructure including transport, power, housing
and bandwidth (notwithstanding recent improvements).
2. DcpartmentofTelccommunications (Dol) regulations hampering sufficient/unrestricted
inter-connectivity.
3. Non-granting of industry status.
4. Insufficient regulations in the area of data protection security.
5. Undue emphasis on financial services.

While the problems need to be addressed with alacrity, endeavors need also to be initiated
to reposition India's ITES as a destination like Ireland, for higher value services. It must be
realized that low cost skill base advantage, in any case, would not be sustainable in the
longrun.

India, therefore, needs to address the deficiencies/inadequacies and quickly improve

efficiencies all round- People, Processes and the Infrastructure.

Appropriate corrective actions, therefore, need to be initiated by all concerned - the

Governments, the Industry A.:;sociations/Bodies and the LT. Companies. Discernible impact
must be seen/felt in 'real time' and sustainable results must be achieved on the ground.

Ifthis does not happen, the BPO/ITES potential, such as it is perceived, might remain just
a day dream or another "Hype" phenomenon.

Ifthe BPO/ITES potential remains as a day dream or another Hype phenomenon, India
would be denying herself-

1. ITES revenues aggregating US $ 21-24 billion by 2008. (S 1 billion = Rs. 5000

cores approx.)

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Unit 3 Data Communication and IT Enabled Services

2. Employment generation ofover 4 millions, 2 millions directly, 2 millions indirectly.

3. ITE Services and ITES share ofGDP moving from 1.4% as at 2001 to 7% by 2008.
4. A firm place on the global technology map as a major Technology Hub.

India can ill afford to lose all this. India, therefore, has to make all the right moves in the
spirit of'Do it right, the first time, every time'. Iflndia makes the right moves, and discernible
and sustainable results arc seen and felt, there is a whole new world- not VIRTUAL but
REAL world - out there to be conquered.

3.9 SUMMARY

Sequence of instructions, v.'fitten in a language, which can be understood by a computer,

is called a computer program/software. Computer software are broadly divided into two
major categories i.e. System Software and Application Software. System sofiware is a set
of generalized programs that manage the resomccs of the computers, such as the central
processor, communication links and peripheral devices whereas application software's
arc computer programs written for a specific application for individual organizations.

Data Processing involves a number of operations to convert data into information. Batch
processing, online processing, online real tin1c process, distributed data processing, time
sharing, multiprogramming, and multiprocessing are diiTcrent modes of data processing.

Various types ofnetworks arc LAN, MA01, WAN, Backbone 1\ctwork & VAN. Network
topologies arc star topology, bus topology and ring topology. Internet has emerged as an
electronic medium that can no longer be ignored, particularly when it is fast converting the
'Citizens' into 'Netizens'.

Integrated Services Digital Network is considered to be "the final step in which digital
reaches customer premises/doorsteps, first on copper and then on 'fiber'". ISDN is an
international standard for transmitting voice data, image .and video to support a wide
range of services over the public telephone lines

IT Enabled services (ITES), also called web enabled services or remote services or Tclc-
working, covers the entire gamut of operations which exploit information technology for
improving efficiency ofan organif.ation.

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 Management Information Systems

4.1 INTRODUCTION
A decision is a choice made from available alternatives. MIS is crucial for Decision Making
as it facilitates effective and eflicient decision making. All managers/ management have to
take decisions for good and efficient functioning ofan organization. Decisions are taken at
all levels of management, decision taken at the lower level of management is structured
(routine or repetitive), decisions taken at the middle level ofmanagement are both structured
and unstructured whereas decision taken on the top level ofmanagement is unstructured
(innovative, strategic, long term). A decision maker makes use various tools of decision
making. to be taken by the Manager or Management.

4.2 MA.~AGEMENT

Management is "the art ofgetting things done through people". A manager is defined as a
person who achieves the organizational goals by motivating others to perform- not only
by performing himself Modem management in the environment oftcchnology is becoming
more of science than an art.

Management, which is defmed as "the process of planning, leading, organizing and

controlling the resources ofan organization in the effective and efficient pursuit ofspecified
organizational goals," is responsible for survival, success and prosperity oforgani7a.tion.
But in discharging its functions, it faces lot ofproblems in today's dynamic and fiercely
competitive world.

Modern management system relies and depends on MIS. The complexity of business
management and competitive nature ofbusiness requires handing ofbusiness operations
with skills and foresight to avoid crisis. Modern business management requires shift from
the traditional controls to managerial controls. The manager becomes more efficient ifhe is
well informed, has a knowledge base, experience and analytical skills and is able to face
the uncertainties ifrisks ofbusiness. All this is possible only ifthe management is supported
by MIS.

The management has to utilize the resources -Human, Financial and Physical- effectively,
by doing right things, and efficiently, by doing things right, so that, at the end, it is able to
get the things 'done' and 'deliver goods/results'. This involves managing the work, managing
the people and managing the operations optimally.

Optimal utilization ofresources, in turn, involves exercising choices and hence the basic
job ofthe management could be considered to be 'Decision Making' in discharging various
functions assigned to it.

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Unit 4 Management and Decision .Making

Managers, therefore, have to develop decision making skills as managers are evaluated/
rewarded on the basis of the importance, numbers and resultc; ofthcir decisions. Quality of
decisions of managers' reach is the yardstick of their effectiveness and oftheir value to the
organizations.

4.3 DECISION MAKING

A decision is the choice out of several options made by the decision maker to achieve
some objective in a given situation.

A number of experts consider decision making as the single most important managerial
function. Decisions arc made at different levels in the organization structure. The decisions
made at different levels vary in their content, risks involved, complexity and the implications.
The information support required for the decision making process also varies according to
the type of decision and the level within the organization at which such decision is being
made.

The major characteristics ofthe business decision making arc :

a Sequential in nature
b. Exceedingly complex due to risks and trade offs
c. Influenced by personal value
d. Made in institutional settings and business environment context

Decision Making Environment

Decisions could be made under different types of environment viz., ambiguity, certainty,
uncertainty and risk. An environment is ambiguous when the problem is not clear, the goal
:.s not clear and hence the outcome also is not clear.

The certainty environment is one where the relationship between inputs and outputs is
known and hence the result is also known. The uncertainty clement is one where there is
.mawarcness about resources, input/output relations and the outcome is uncertain or
;mpredictablc. The risk environment is one where the result is unknown- it might result in
?fOfits, but it might lead to incurring losses as well.

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 Management Information Systems

Decision Types

Decisions could be divided into two categories m., the Programmed Decisions and Non-
programmed Decisions.

1. Programmed Decisions

The major characteristics ofthe programmed decisions are :

• Routine/structured
• Repetitive/short-term
• Definite procedure is to be followed
• There are laid down norms
• The situations are known
• Taken at the lower/operating levels in an organization

The techniques used for taking programmed decisions are :

• Habit
• Standard Operating Procedure (SOP)
• Organi:tational Hierarchy/Structure
• Operational Research
• Computers

2. Non-Programmed Decisions :

The major characteristics ofthe non-programmed decisions are :

• Novel-not cut and dried
• Innovative
• New/complex situations
• Important and critical
• Strategic
• Long-term

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Unit 4 :yfanagement and Decision Making

The techniques used for taking non-programmed decisions are :

• Judgment
• Intuition
• Business acumen
• Creativity
• Complex/specially designed computer programs
• Training executives

Decisions taken at the lower level are programmed, while ac; decision taken at higher level
are non-programmed, as illustrated in Fig. 4.1.

Management + - - - - - - - Non-Programmed
TOP ~3road. Unst~cturcd, Infrequent
MIDDLE Both Structured ......._.....__----~&Unstru~~c
& -
~d_ __ _J

---------------~~quent
-- I
LOWER Routine, Structured, I
- - -·
Programmed---------+
Fig. 4.1 Levels of management and types of decisions
This can also be illustrated by looking at the decision making process from the organiz.:'ltional
pyramidal point ofview. Refer to Fig. 4.2.

Unstructured

Tactical
Planning

Operational Planning

Transaction Planning Stmctured

Fig. 4.2 Decision making at different levels of organization

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 Management lnfommtion Systems

16 Activity.A:
Give any 3 examples ofdifferent types of decisions.

4.4 DECISION MAKING PROCESS

The decision making process involves the following steps :

• Determine existence ofproblems and/or opportunities.
• Generate alternative courses ofaction.
• Analyze/choose/select a course of action.
• Implement the course of action.
• Monitor, follow-up and initiate course-corrective action. Refer in Table 4.1.

Table 4.1 Steps in decision making process as illustrated by Griffin

Step Detail

1 Recognizing and Some stimulus indicates that a decision must be made.

defining the situation The stimulus may be positive or negative.
2 Identifying alternatives Both obvious and creative alternatives are desired. In
general, the more significant the decision, the more
alternatives should be generated.
--
3 Evaluating alternatives Each alternative is evaluated to determine its feasibility,
its satisfactoriness and its consequences. .. - -
4 Selecting the best Con.o;;ider all situational factors and choose the alternative
alternative that best fit.;; the manager's situation.
5 Implementing the The chosen alternative is implemented into organizational
chosen alternative system.
6 Follow up and At sometime in the future, the manager should ascertain
evaluation the extent to which the alternative chosen in step 4 and
implemented in step 5 has worked.
-

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Unit 4 Management and Decision Making

The decision making process could be represented as shown in the flow chart. Refer to
Fig. 4.3.
~-----------------. Identify & Define the probl;~]
Revise
.. ,
I
...
Develop alternative solutions
... I
~I Evaluate alternative solutions I
Revise

~ ~
-- l
Certainty Risk Uncertainty
Conditions Conditions Conditions
I ..... ~ I
SelectAlternative
Revise

•
Implement Decision

Evaluate & Control

Fig. 4.3 : The Process of Decision Making

Decision-Making Styles

Decision could be taken by various functional executives. The decisions could be :

1. Taken by the individual Manager
2. Consultative decisions- either formal or informal consultations
3. Group Decisions by

• Co-actions
• Task groups

• Interacting groups

• Brain storming

• Delphi Techniques

• Nominal Grouping Technique

• Consensus mapping

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 Management lnfom1ation Systems

4.5 DECISIO~-MAKI~G TOOLS

There are various decision making tools as listed below :

1. Pay OffMatrix
2. Decision Trec/Dccision Tables
3. Queuing Models
4. Distribution Models
5. Inventory Models
6. Game 'lbeory
7. Devii's Advocate
8. Multiple Advocacy
9. Dialectic Inquiry

1. Pay Off Matrix

"Pay OffMatrix" is one ofthe more commonly used and essential quantitative technique of
Decision Making. It helps in summarizing the interactions ofvarious alternative actions and
events. The Pay OfTMatrix takes into account the 'Probability' (i.e., the degree of
likelihood that a particular event would occm). Probabilities range in value from 0 (no
chance of occurring) to 1 (certain chance of occurring). The probabilities are usually
expressed in terms of percentages, or as the number of times the event is apt to occm in a
hundred trials.

By using probabilities a Pay OffMatrix is prepared, which provides the decision- maker
with quantitative mea<;ures of the Pay Off for each possible consequences and for each
alternative under consideration. This is known as Expected Value (EV).

Positive Pay Off implies profit and Negative Pay-Off implies loss. Let us illustrate the use
ofPay Offby the following example :

A businessman wants to invest Rs. I ,00,000 in a new business. He has identified three
alternatives- Activity A, Band C. The businessman has worked out the probabilities of
his return on investment. He has estimated that there is a probability of0.40 that sales will
be high and a probability of0.60 that the sales will be low.

The Pay OffMatrix based on the data available with the businessman. Refer to Table 4.2.

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Unit 4 Management and Decision Making

Table 4.2 The Pay Off Matrix

·-

Altema~~Probability
igh Sales
: 0.40)
I Low Sales
(Probability : 0.60)
-t Rs. 45,000 - Rs. 10,000

I· Rs. 80,000 - Rs. 25,000

-
ActivityC + Rs. 30,000 - Rs. 5,000

From the Pay OffMatrix, the Expected Value ofthe investment inActivity "A" will be
as follows:

EV -- 0.40 (45,000) _._ 0.60 (-10,000)

,- 18,000 - 6,000
12,000

The Expected Value for Activity 'B' will be

bV = 0.40 (80,000) + 0.60 (-25,000)
= 32,000 - 15,000
- 17,000

The Expected Value for Activity 'C' will be

EV - 0.40 (30,000 10.60 (-5,000)
12,000 - 3,000
-= 9,000

The Pay Off Matrix shows that the Activity 'B' can give him the best possible return,
among the three alternatives.

It must, however, be remembered that the Pay OffMatrix bas an obvious weakness. It is
dependent on the decision maker's judgement ofthe possible outcomes for each alternative
and also the values the decision-maker assigns to each.

At the same time, it must also be remembered that the Pay OffMatrix forces the decision
maker to make a firm judgment about what he thinks may happen and the worth to him
ofthose outcomes.

The Pay OffMatrix docs not make a decision but it docs force the decision maker
to be more realistic about possible outcomes.

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 Management Information Systems

2. Decision Tree

The Decision Tree technique is basically an extension ofprobability theory to decision

making. It is a simple technique, which mathematically factors the degree ofrisk into
a business decision. It allows the decision maker to work out the options, after
taking into account the 'odds', and then make a reasonably precise comparison among
alternative courses ofaction.

It is a useful technique for presenting analysis when the decision maker has to make
a sequence of decisions. It is referred to as Decision Tree as different alternatives
form branches from an initial decision point (known as Decision Node) and then
moves on to various options emanating from different points (called Chance Nodes).

The steps involved are :

• Build the Tree, starting with decision points.
• Add branches for external states of events, which are likely to occur.
• Include probability of each state.
• Assign a value of each unique branch.
• Work backwards to analyze the consequences at each 'node' ofthe tree.

Thus, to summarize, the decision tree is a means ofrepresenting the sequential multi-
stage logic of a decision problem. The decision tree technique is oriented to show
decision paths that may be taken rather than the criteria for selecting a given path. It
is convenient for showing the probabilities for outcomes,

Decision Trees could be represented in different ways viz. :

Fig. 4.4 Bottom to Top

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Unit 4 Management and Decision Making

Fig. 4.5 Left to Right

Fig. 4.6 Top to Bottom

Standard Presentation :

The standard presentation ofdecision tree is as follows :

· ····-·· · ··· ·· ··· ·····• Chance Node

....... ····· ···· ...........,_ 2"d Decision Point

........... .... -· .. .,_ Initial Point

(Decision N ode)
:Fig. 4.7 Standard Presentation

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 Management Information Systems

3. Decision Rules

Decision Rules and Decision Tables arc used together. Decision Rules enable decisions
to be made better and more economically. Decisions could also be faster and
more accurate. Decision Rulesn'ables arc to be used for programmable or routine/
operating decision. It is, therefore, imperative that Decision Rules are documented.

4 Decision Table

Decision Table documents rules that select one or more actions based on one or
more conditions from a set of possible conditions. It is precise and compact.
Decision Table may include both qualitative and quantitative bases for decision
making.

Decision Tables are in the form of"lf" LISTINGS and "THEN" LISTINGS. The
"IF" listings stipulate the required conditions and the "THEN" listings provide the
actions to be taken ifthe conditions exist.

The "IF" LISTINGS form the 'CONDITION STUB' and the "THEN" LISTINGS
form the 'ACTION STUFf.

The Decision Table helps the analyst consider all options, conditions, variables
and alternatives. It must, however, be remembered that this technique has to be
used in conjunction with other techniques.

RS..Acti.Yity B :
Draw a decision tree to show the fixed deposits schemes offered to customers in a bank

4.6 PRI:t\'CIPLE OJ<' RATIONALITY

Apart from the various tools and techniques used for decision-making as illustrated earlier,
the following principles arc also used in/for Decision-Making,

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Unit 4 Management and Decision Making

1. The Principle ofRounded Rationality.

2. The Principle ofLogic and Intuition.

1. Principle of Bounded Rationality

While the decisions should normally be based on rationality, what is observed is that
our rationality, in reality, is conditioned by various factors/constraints like
financial, technical, administrative etc.

In view of this reality of situation, the Principle of Bounded Rationality comes into
existence. It implies that it is practically difficult, almost impossible, to take a completely
rational decision. The Principle of Bounded Rationality, therefore, highlights the fact
that as it is not possible to arrive at a scientific solution, it is worthwhile to carry on
and arrive at workable decisions which fit into the Principle ofBounded Rationality.

If a scientific decision either cannot be taken or cannot be implemented, it would

remain only an ideal, hypothetical yet impracticable decision. Under these
circumstances a workable solution should be worked out while still continuing to
work on developing the scientific solution.

In other words, workable decision is the starting point of a scientific solution which is
the ultimate goal that one must strive to achieve.

2 Principle ofl.~ogic and Intuition

The Principle of Logic and Intuition refers to taking a number of decisions b as e d

on their own logic and intuition/hunch, today's professional managers are more keen
to take decisions based on data, facts and figures.

Decisions based on intuitions are those where logical explanation is not possible
though the decision-makers themselves will believe, and like others to believe, that
their approach/decision is and would be the right one.

It must be remembered that in today's environment, where so much information is

available, it would not at all be desirable to ignore it while arriving at a decision. The
focus should be to arrive at a decision mainly based on data/in1ormation, while giving
due weightage to logic and intuition.

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 Management Information Systems

Decision Making Models

Every manager has to take decisions and, in a way, every manager is a model of decision-
making himself. However, in the context of our discussions, we would note the following
decision-making models :
1. The Classical Model
2. TheAdministrativeModcl
3. The Herbert Simon Model

1. The Classical Model

As per the classical model of decision-making, a manager, when confronted with a

decision-making situation, would collect ALL the infonnation that is required for that
activity and would take a decision which would be in the Best Interest o f the
organization.

2. The Administrative Model

Under the Administrative Model, the manager is more concerned about himself As
such, when confronted with a decision-making situation, the manager would collect
WHATEVER information could be available and take a decision which may not be in
the best interests ofthe organization but would certainly be in the best interests ofthe
manager.

Expediency and opportunism arc the hall-marks of the Administrative Model.

3. The Herbert Simon Model

The Herbert Simon Model is related to the Decision Making Process. The Simon
Model describes the core of the Decision Making Process and is generally used
as the basis for describing the Decision Making Process.

According to the Herbert Simon Model, the Decision Making Process consists
ofthe following three inter-related phases :
a. The Intelligence Phase
b. The Design Phase
c. The Choice Phase

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Unit 4 Management and Decision Making

~'ig. 4.8 The Herbert Simon Model

a. The Intelligence Phase

It consists ofproblem finding activities related to searching ofthe operating/business

environment, for identifying conditions calling for decisions. This is imperative as
there cannot be Analysis/Design/Choice unless the problem is identified or clearly
formulated/ stated.

The Intelligence Phase requires extensive and comprehensive data base. It, therefore,
involves searching or scanning ofthe environment- both internal as well as external
-for conditions, which indicate or suggest problem or opportunity. The activity of
search for problem/opportunity involves a scan ofthe environment.

The environment for the purpose ofdiscussions in the Herbert Simon Model is divided
into three broad categories :

1. Societal Environment
2. Competitive Environment
3. Organ.b.ational Environment

The Societal Environment : The societal environment would include the economic,
legal and social environment in which the organization operates.

The Competitive Environment : The competitive environment would include

understanding and analyzing the characteristics, trends and behavior of/at the market
place and the market players in which the organization operates.

The Organizational Environment : The organi'l.ational environment would include the

capabilities, strengths, weaknesses, constraints and other factors affecting the ability
ofthe organization to discharge/carry out/perform its functions/activities.

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 Management lnfonnation Systems

The search/scanning of the environment leads to identificationirecognition ofthc

problem/opportunity which then leads to the next phase i.e., the Design phase of the
Decision Making Process.

b. The Design Phase

The Design Phase involves/includes/consists ofinventing, developing and analy.t.ing

likely/probable/possible alternatives/courses of actioniresponscs to the problem/
opportunity situation.

Generally, the following typical iterative steps arc used/resorted to :

1. Support in understanding the problem. A correct model ofthe situation needs to
be created/applied and the assumptions ofthe model tested.

2. Support for generating solutions by :

• Manipulating the model to develop insights.
• Creating/using database retrieval system which may help in generating
solution.
3. Support for testing feasibility of solutions, by analyzing it in terms of the
environment it afiects. The environment would include, as stated earlier, problem
area, organization itself, competitors and society.

The Design Phase then leads to the third and fmal phase ofthe Simon Model viz., The
Choice Phase.

c. The Choice Phase

The Choice Phase leads to the selection of a specific alternative or course of action
from the ones generated and considered during the Design Phase. The Choice Phase
requires the application ofa choice procedure and the implementation ofthe chosen
alternative.

There is a flow of activities from intelligence to design to choice, but at any phase
there may be a return to a previous phase. For example the decision maker in the
choice phase reject all alternatives and return to the design phase for generation of
additional alternatives.

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Unit 4 Management and Decision Making

The Limitations of Simon Model

While, undoubtedly, the Simon Model provides the core ofthe decision-making process,
it must be noted that it docs not go beyond the Choice Pha'>e, The Simon Model thereby
excludes or does not take cognizance of the implementation and the feedback aspect<;,
which are inseparable part ofthe decision making process, as in vogue now.

In this context, it would be both relevant and pertinent to keep in mind the following steps
of a decision making process, suggested by Rubenstein and Hcrbertson :

1. Recognition ofproblem or need for decision.

2. Analysis and statement of alternatives.

3. Choice among the alternatives.

4. Communication and implementation ofdecision.

5. Follow up and feedback of results of decision.

Relevance of Simon Model

Notwithstanding the limitation ofthe Simon Model, the fact remains that it is relevant to the
design ofint(xmation support for decision making within the management information system.

4.7 SUMMARY

Modem management in the environment oftechnology is becoming more of science than

an art. Modem management system relies and depends on MIS

A decision is the choice out of several options made by the decision maker to achieve
some objective in a given situation. Decisions could be made under different types of
environment viz., ambiguity, certainty, uncertainty and risk. Decisions can either be
programmed decisions which are taken at lower levels ofmanager and non-programmed
decisions which are taken at higher levels ofmanagement.

Various decision making models arc:- The Classical Model, The Administrative Model
and The I lerbert Simon Model

Limitation ofthe Simon ~odel is that it docs not go beyond the Choice Phase. The Simon
Model thereby excludes or does not take cognizance of the implementation and the
feedback aspects, which are inseparable part of the decision making process.

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 Management Infom1ation Systems

The steps of decision making process, suggested by Rubenstein and Herbertson are:
1. Recognition ofproblem or need for decision.
2. Analysis and statement ofalternatives.
3. Choice among the alternatives.
4. Communication and implementation ofdecision.
5. Follow up and feedback ofresults ofdecision.

4.8 SELF-ASSESSMENT QUESTIONS

A. Answerthefollowing
1. Modem management is a combination ofart and science. Discuss
2. Modem management relies on MIS
3. Explain the various models of decision making
4. Expl~in different types ofdecisions.

5. List down the various tools ofdecision making and briefly explain each ofthem.
6. Herbert Simon Model allows backtracking. Justiiy
7. What are the principles used in decision making?
8. Explain the steps of decision making process suggested by Rubenstein and
Herbertson

B. State Whether True or False

1. Management is a combination of art, science and commerce
2. A decision is a choice made from available alternatives
3. Decisions are always made under same environment
4. Uncertain environment means unawareness
5. Decision making is one ofthe single most important managerial function

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 Management Information Systems

5.1 INTRODUCTION
Initially, while opening our discussions about MIS, we have said that MIS is a System,
which provides Information to the Management. We have also said that we are living in an
Inforn1ation Age. Information is ofcritical importance for setting up, running, survival and
prosperity of a Business Organization. Information is also imperative today as it enables
an organi:~ation to gain and retain competitive edge and emerge winner.

We will now discuss the concepts of information in more details as MIS is centered around
information. But what is fufmmation?

Information is derived from data. Data is nothing but a random, unorganized collection of
indications or measurements ofcertain qualities or attributes relating to an entity, recorded
either in alphabetical, numerical, alphanumerical, voice, image, text or any other form.

Data could also be described as unstructured raw facts, observations or unevaluated

messages in isolation. Data, per se, does not convey much or is not ofmuch use. It is like
a material, which is simply available in an unfinished fonn. Data arc fact<; and figures,
which arc not currently being used in a decision process and usually take the form of
office/historical records that are recorded and filed without immediate intent to retrieve for
decision-making.

Information, on the other hand, is like a finished product. Information, therefore, is defined
as data that is collected, collated, processed, logically organized and analyzed so as to be
of use to the decision maker.

Information, according to Davis and Olson, is "data that has been processed into a form
that is meaningful to the recipient and is ofreal or perceived value in current orprospecti.ve
actions or decisions".

Information is, therefore, the difference which makes the difference. Information brings
clarity and creates an intelligent human response in the mind.

Characteristics of information are:-

It improves representation of an enti.ty
It updates the level ofknowledge
It has a surprise value
It reduces uncertainly
It aids in Decision Making

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 Cnit 5 Information

ItwIll thus, be observed that for data to be converted into information, it has to undergo
processing as illustrated hereunder. Refer to Fig. 5.1.
[ Stored Data I
_I
(§put (Da~ j Processing (Processor) I _.[ Output (In~ormation) I
Fig. 5.1 Data Processing

5.2 INFORMATIO~ PROCESS

--
Asstatcd, data has to be processed before information could be available. Hence, various
operations have to be carried out in converting data into meaningful information. Refer to
Table 5.1.

Table 5.1 Information Process

Capturing e d_ _ ___~
--+-D_a_ta from an event/transaction has to be record_
r-- -- I
~erifYing Data has to be checked/validated for correctness !
Clas..c;;ifYing Data has to be placed in specific categories
- - - 4- -------~

Arranging/Sorting Data has to be placed in a particular order/sequence

----
summanzmg Data elements have to be combined I aggregated
- -- - - --
c'alculating ArithmeticaVLogical calculations I computations have to be carried
out
1-
Stonng - --+1- Data has to be placed in some storage media
Retrieving Spec1fic data elements have to be searched for and accessed

Reproducing Data has to be duplicated from one medium to another

- ----l
Dissemination/ Data has to be transmitted from one place (device) to another
Communication (user).

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 Management Information Systems

£S"Activity A~
a) State the difference between hardcopy and softcopy

b) Information updates level ofknowledge. Explain

Information Presentation

Presentation ofthe information is an art. The data may be collected in the best possible
manner and processed analytically, brining lot ofvalue in the information; however, if it is
no presented properly, it may fail to communicate anything of value to the receiver. The
degree of communication is affected by the methods of transmission, the manner of
infmmation handling and the limitations and constraints of a receiver as the information
processor and the organization as the information user.

Information should be summarized, the principle behind summarization is that too much
information causes confusion, misunderstanding and missing the purpose.

Another method of improving the degree of communication is through message routing.

·fhe aim here is to distribute information to all those who arc accountable for the subsequent
actions or decisions in any manner.

5.3 INFORMATIO~ AND DECISIO~-MAKER

Information is not only relevant but also critical for the decision maker as the quality of
decision making is dependent on the quality ofinformation. More specifically, information
is useful for the decision maker as:

1. Information helps in minimizing, ifnot eliminating altogether, the elements ofrisk and
uncertainty in decision making.

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Unit 5 Information

2. Information minimizes the element of'surprise' and uncertainty in decision making.

3. Information improves the quality of decision making.

4. Information helps to achieve the most optimum results within given constraints and

5. Information affects the decision making behavior and makes the difference.

5.4 SOURCES OF INFORMATION

Data is the foundation of all information. A few aspects of data, sources of data and
methods of collecting the data for the purposes of converting them into infonnation arc
described in the paragraphs which follow.

Primary and Secondary Data : Data arc the raw materials used for obtaining information.
Data is derived from a number of sources, both intemal as well as extemal. Ifthe data is
collected for. the first time by the researcher, it is classified as Primary Data. If, however,
data is borrowed by the researcher from other sources, it is referred to as Secondary
Data.

Primary data could be gathered directly from the respondent. Different techniques like
observations, questionnaires, interviews etc. can be used for obtaining primary data, which
can then be converted into information.

Secondary sources ofdata/infom1ation include internal records as well as external records.

Sources like newspapers, magazines, trade journals, government publications. government
policy documents, research reports, web sites etc. are included hereunder.

Classification ofinformation

1. Action Information : The information which induces action is called an action

information . Example : When the attendance of students for a particular subject
suddenly falls down to 40% calls for in1mcdiate action

2. Non-action information which communicates only the status of a situation is a no-

action information. Example : While watching the live cricket match you understand
that India's current run rate is 4 per over whereas its required run rate is 7 per over.
You have this information but this a non action information.

3. Recurring : The information that is generated at regular information. Example : The

monthly sales reports, accounts statement.

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 Management Information Systems

4. Non-recurring: Non repetitive in nature. Example: The financial analysis or the report
on the market research.
5. Internal Information : The information generated through the internal sources of the
organization.
6. External Information : The information generated through external sources
Example: Government reports etc.

MIS and Information Concepts

MIS should provide the information which has a surprise value and which reduces the
uncertainty. It should simultaneously build the knowledge base. While designing MIS, due
regard should be given to the communication theory oftransmitting the information from
the sources ofthe destination. MIS should usc the redundancy of data and information as
a measure to control the error in communication

Information is a quality product for organi7ation. The quality can be ensured ifthe inputs to
the MIS are controlled on the factors of impartiality, validity, reliability, consistency and
age. MIS should give regard to the information used for planning, performance control
and knowledge database.

Recognizing that the information may be misused if it falls into wrong hands, the MTS
design should have the features of filtering, blocking, suppressions and delay delivery.

PS.Actiyity B :
a) Distinguish between primary data and secondary data. Along with examples

- - - - - -- - - -- - --- - - -- - - - - - - - - - - - -

b) Information minimizes risk. Do you agree with this statement? Justify your answers
with the help ofexamples.

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Unit 5 Information

5.5 TYPES OF INFORMATION

------------------------------------------ - - - - -
Information is to be used for decision making. The process ofdecision making is generally
divided into three types :
1. Strategic Level
2. Tactical Level
3. Operational Level

1. Strategic Level

For Strategic decision making, one needs strategic information, which is wholistic,
unstructured and draws heavily from the external environment. It would also require
more futuristic inputs like the emerging technologies, competition, consumer
preferences, socio-eco-political changes etc. as these inputs would be used for long-
term planning.

2. Tactical Level

Tactical information would be used for medium/short-term planning by the Middle

Management, Budgets, forecast'i, analysis, cash/funds flow projections are part of
the tactical information. Such an information is mostly from internal environment and
partly from external environment like customer perceptions, competitors' strategy,
pricing etc. It has medium term impact.

3. Operational Level

Operational information is mainly for/from operating people ranging from a 'shift' to a

day or a week or a month. It is basically about what is currently happening around
within the organization and is mainly dra\:vn from internal sources. It also covers a
specific product, specific activity and a smaller group/number ofpeople.

Apart from the three types as stated above, we could also divide information into Planning
Information and Control Information. The planning and control information could be
differentiated as in table 5.2.

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Yianagcment Information Systems

Table 5.2 Difference between planning and control information

~nninglnformation J C~Information 1
rIt covers the whole organization IIt is c~nc~med with smal-1,-sp_e_cific part of
~---- __ orgaruzation_._ _ _ _ _ _ _ _ _ _ _ -;
' It has a longer time span It has a shorter time span
-- - - - - - - - - - - -·
I It looks for and analyses It looks for specific details for functional

I trends/patterns
Used for working futuristic
activity.
- - - ----- -- -- '
~nds/forecas_t._____ _ ___________ _j
5.6 ATTRIBUTES OF INFORMATION

Information, to be ofusc for the decision maker, has to possess certain attributes as stated
hereunder:

• Timely availability

• Accuracy
• Reliahili~
• Periodicity/Frequency
• Verifiability

• Pertinent/Relevant

• Completeness

• Comprehensibility

• Clarity

• Consistency
• Brevity
• Cost effectiveness

Needless to add, more attributes the 'infmmation' possesses, better the quality it would
have, leading to higher value ofsuch infom1ation for the organi:t..ation and decision maker.
Unit 5 Information

~Activity C :
More attributes the 'information' possesses, better the quality it would have. Do you agree
with this statement? Justify your answers.

5.7 HUMM AS Th'FORMATION PROCESSOR

A human being can hear, se-e, touch, feel and smell. These senses are then transmitted to
the brain which analyses them and then comes out with appropriate response. This human
behavior could be seen/explained in terms ofinformation processing.

The sensory receptors (cars, eyes, nose, etc.) pick up/receive signals which are then
transmitted to the brain. The signals arc then processed by the brain and appropriate
responses are communicated. Thus, the signals from sensory receptors become inputs. ·
These signals are transmitted through the nervous system which acts as a channel or medium.
These signals arc communicated to brain where, while processing the signals, the brain
acts as a Central Processing Unit. The processing leads to responses, which cati be.
considered as outputs.

The above mentioned details could be referred to as "Model of Human as Information

Processor."

The Model ofHuman as Information Processor can be presented in Fig. 5.2.

I Memory J
Input From Mental Output
Sensory Processing Channel ~ Response
Receptors

Fig. 5.2 Human as Information Processor

115
 Management Information Systems

However, human beings cannot go on accepting unlimited inputs and keep coming up with
unlimited outputs, as the human capacity to accept input<; and offer outputs is rather limited.
Ifthere is too much of input, the human capacity will simply be unable to accept the input
and correspondingly, the output will also be reduced/restricted. This "too much of inputs"
affecting the output is considered as "overloading".

To avoid this eventuality, humans restrict input to a manageable quantity by being selective
in accepting some inputs and blocking other inputs. This process leads to creation offilters
resulting from :
(a) Frame of reference of the person concerned, based on prior knowledge and
expenence.
(b) Normal decision procedure.
(c) Decision making under stress.

This process of filtering can be illustrated in Fig. 5.3 & Fig. 5.4.

L
Input
· =uli=-·
s:::..::tnn
:::..::
;I
_j-1-_-_-_-_-_.•;.
~___....
FilteS
Mental 1
: Processing

Fig. 5.3 Filtering under normal decision making conditions

Input Mental
Stimuli 1----- : Processing
----l•l
- ·- --__J

Fig. 5.4 Filtering under decision making stress

It may be noted that, filtering, apart from blocking unwanted data, may also block data
which is not considered to be consistent with the established frame ofreference. This, in
turn, may result in errors ofperception like omission, distortion, inferences etc. These
errors ofperception may reduce information content.
Data
Storage

Input Data - - • • Mental Processing - - _. Decisions

Fig. 5.5 Human information processing mechanism and decision-making process

116
Unit 5 Information

The Newell- Simon Model

Allel Newell and Herbert Simon have proposed a model of human problem solving and
human information processing system. According to the model, the human information
processing system consists ofa processor, sensory inputs, motor output and three different
memories- Long Term Memory (LTM), Short Term Memory (STM) and External Memory
(EM) as illustrated hereafter. Refer to Fig. 5.6.

Long Term Memory

~-------

Processor t - - - - -- -

~ ShortTermMemoty
Input • blementary Processor 1--------. Output

Interpreter
I
I

Fig. 5.6 LTM, STM and EM

The human memory can perform only one information processing task at a time (known as
Serial Processing) rather than processing number of tasks at a time (known as Parallel
Processing).

In view of our earlier discussions, the comparative presentation ofNewell-Simon Model

and Computer System Model can now be shown as follows. Refer to Fig. 5.7 and Fig. 5.8.

Receptors

Environment Processor

+-I Effectors

Fig. 5. 7 Human Information Processing System

117
 :vtanagcmcnt Information Systems

r
1
Storage
~ t-
Input
L - - - - --
:
_ ___,•~ Processo~--~•~L Output

Fig. 5.8 Computer Information Processing System

5.8 INFORMATION REQUIREMENT

---------------------
As discussed earlier, information today has become a strategic tool for organization.
Information is now also considered as a resource. much like capital and labor. As such, it
becomes imperative to analyLe and assess the information requirement/needs ofbusiness
organiYations activity-wise, function-wise, level-wise as well as for organi?ation as a whole,
as the information required at each level is different.

Obviously, then, defining the specific information requirements becomes the most critical-
and therefore the most difficult- task for the Systems Analyst. This is one area where
many large system efforts could go wrong, bringing the edifice of the organizational
information system crumbling down as faulty requirements analysis is a leading cause of
systems failure and high systems development costs. Analyzing and assessing information
requirements/needs, therefore, must be given the attention and importance it deserves.

The Information Requirement-; within an organi7ation, llicrarchy level-wise, activity-wise

and function-wise, could be presented as follows. Refer to Fig. 5.9.

.A\
Strategic Senior
Level Jl~ Managers

Management • • a. Midd le
Level - \llanagcrs

Knowledge ~ Knowledge &

Level . . . Data Workers

Operational Operational
Level Managers

~
>
r. :::::::
(!;
~

c:
::l r.
::>:> 0
c: "'c:::
0 3
::::s
r.
r. ~. <=!
(;
"'::::s
::::s
cr.; "'
Fig. 5.9 Hierarchy LeveVActivity/Function-wise: Information Requirements
118
Unit 5 Information

There are four reasons which make it difficult to obtain a correct and complete set of
information requirements:
1. The constraints on humans as information processors and problem solvers.
2. The variety and complexity ofinfonnation requirements.
3. The complex patterns ofinteraction among users and analyst in defining requirements.
4. Unwillingness of some users to provide requirements.

Information requirement is a detailed statement ofthe information needs that a new system
must satisfy. It involves identifying who need"> what information, where, when and how.

Information requirement analysis carcfi.dly defines the objectives ofthe new or modified
system and develops a detailed description ofthc functions that the new system is expected
to perform. Requirements must consider economic, technical and time constraints as well
as the goals, procedures and decision processes of the organization.

Information Requirements At Different Levels

Information requirements need to be established at three levels for the purpose ofdeveloping
implement-ing organizational information system. The three levels are as follows:
1. Organi7.ationallnformation Requirements.
2. The requirements for each database defined by data models and other
specifications.
3. The detailed information requirements for an application.

1. Organizational Level Information Requirement

Information requirements are required at the organization-wide level for information

system planning, identifying applications and planning an information architecture. It
is, however, imperative that the organization has a clear understanding of both its
long- term and short-term information requirements. The process of organization-
level information requi rcment determination obtains, organizes and documents a
complete set ofhigh level, strategic requirements. These requirements arc then factored
into data bases and sub-systems, which can be scheduled for development.

Obtaining organizational information requirements would mainly consist ofthe follo\\ing

steps:

119
 Management Information Systems

a. Defining underlying sub-systems

b. Developing manager by sub-system matrix
c. Defining and evaluating information requirement for organizational sub- systems.

a. Defining underlying sub-systems: Every organization, viewed as a system, would

consist of a number of sub-systems. These sub-systems could be obtained by
an interactive process of discussing all the organin1tional function.<;/activities and
arriving at the broad classification ofthe sub-systems. This activity enables the
systems person to subdivide requirements determination by major organizational
activity and make the process more manageable.

b. Developing manager by sub-system matrix: After defming the underlying

organizational sub-systems, the next step is to relate specific managers to
orga.rW.ational sub-systems using a matrix format. The matrix can be prepared
by reviewing the major decision responsibilities of each manager- middle to
top - and associating decision making with specific sub-system. Thus, one gets
a clear picture ofthe decision making responsibility, sub-system wise, which, in
tum, helps clarify responsibilities and identify those managers to be interviewed
relative to each sub-system. Refer to Fig. 5.10.
00 ;::::.
s6 !:::: OJ)
o ·E ·~ ~ e
Q)

;
0 Q)
t)
·.p
t)
~ ~ ·~ ·~ !::::!::::
0:§
~
0 ell
~ ta ;>
~ ~ §: ~
t)
Q)
p::: .s .s ::E ~ ........ C/:1 ~ < ~<t:
Mgrs
MgrA
MgrB
MgrC
MgrD

MgrN
.Fig. 5.10 An illustrative manager by sub-system matrix

120
t:nit 5 Infommtion

c. Define and evaluate information requirements for organiYational sub- system.

At this stage the information requirements ofeach sub-system ofthe organization

arc obtained by conducting group interviews ofthose managers having major
decision- making responsibility for the sub-systems.

While conducting interviews, three sets of questions are asked to improve the
chances ofobtaining a complete set ofrequirements. The three sets of questions
are:

1. What problem do the managers have and what information is needed for
solving them? What decisions do the managers make and what information
do they need for decision making?

2. What factors are critical to the success ofthe managers activity and what
information do they need to achieve success in them or monitor progress?

3. What are the outputs (ends) from managerial activities and what information
do they need to measure effectiveness in achieving the outputs? What
resources are used in producing the outputs and what information is
needed to meac;ure efficiency in use ofthe resources?

(These questions are derived from three approaches viz., Business System
Planning, Critical Success Factors and Ends - Means Analysis, which are
discussed later).

2. Data Base Requirements

Data base requirements arise both from applications and ad-hoc queries. The overall
architecture for the database to meet these requirements is defined as part of the
organizational information requirement. Major classes of data are then defmed and
associated with organization processes that require them.

The process of obtaining and organizing a more detailed database requirements can
be divided into defining data requirement as perceived by the users (conceptual or
logical requirements) and defining requirements for physical design ofthe database.

3. Application Level Information Requirement

An application, basically a sub-system ofthe overall information-system, provides

information processing for a specific organizational unit/fwlctionlactivity. The process

121
 Management lnfom1ation Systems

for the determination of information requirement at the application level defines and
documents specific information content as also design and implementation
requirements.

Application level information requirement are mainly oftwo types :

(a) Social or Behavioral Requirements and
(b) Technical Requirements

The social/behavioral requirements, based on job design, specify objectives and

assumptions like, for example :
• Individual Role Assumptions
• Responsibility Assumptions
• Work OrganiY.ation Design Objectives
• Organi'lational Policies

The technical requirements, based on information needed for performing task/job, specify
inputs, outputs, stored data and information processes. The structure and format of data
are important in arriving at technical requirement.

The technical requirement also include interface requirements between the user system
and the applications system. The interface requirements include data presentation format,
screen design, user language structure, feedback and assistance provisions, error control
and response time.

5.9 TECHNIQUES FOR ASSESSING INFOR:viATION REQUIREMENT

Some ofthe major ways/tools/methods/techniques for a<;sessing information requirement/

needs arc:-.

1. Asking Questions

Asking questions is one ofthe more frequently used mode ofassessing information
requirement. Questions arc asked to persons associated with usc of system/application
to obtain their requirement<;.

Some 'asking' methods are mentioned below with comments on conditions that suggest
their use. Refer to Table 5.3.

122
t:nit 5 Information

Table 5.3 Techniques for assessing information requirement

Asking Method Description I Conditions Suggesting Use

I
I

Closed Questions Each question has a defmed i When set of factual responses
set ofpossible answers from not be able to recall all
are known or respondent may know all possible responscs.
which the respondent selects. possibilities. Analyst must
-
Open Questions No answers provided. When feelings or opinionsare
Respondent is allowed to important or when respondcnt
formulate responses. has knowledge and abilityto
formulate responses
~~

Brainstorming Group method for eliciting Used to extend boundariesof

wide variety ofsuggestions problem spaces ofparticipants
by open flow of ideas. and elicit non- conventional
solutions.
-
GuidOOBrainstroming Participants arc asked to Used to guide brainstormmgto
define ideal solutions and 'ideal' solutions. Useful where
then select the best feasible participants have system
ideal solution. knowledge, but may be loeked
into anchoring and adjustment
behavior.
-

Group Consensus The participants arc asked for Used to arrive at 'best'
their estimates or expectations judgmental estimate of
regarding significant variables variables that arc difficult
Delphi Method and Group or impossible to estimate
Forming arc examples quantitatively.
One or more asking methods can be used either alone or in conjunction with other tools,
to assess information requirement.

2. Deriving From an Existing Information System

Information systems, currently in operation or having operational history, can be used

to arrive at information requirement for a proposed information system. The types of
existing information systems which could be useful in this regards arc -

123
 Management Information Systems

(a) Existing system to be replaced by new system.

(b) Existing system in another, similar organi:t..ations

(c) Information available from Handbooks, Industry, Specific Studies or Subject

TextBooks.

3. Ends-Means Analysis

The ends-means analysis is a technique used for determining information requirements

ofthe organization at the department and/or individual manager's level.

The technique separates the definition ofends (or outputs) generated by an organization
process, from the means (inputs) used to accomplish them. As the end/output from
one process is the input for next/some other process, the ends-means analysis brings
out information requirement effectively.

The ends-means analysis is based on the Systems Theory. A model of the ends-
means analysis is provided hereunder. Refer to Fig. 5.11.
Process

fuputs ..,
Outputs
...

Feedback - Effeciency
'--- - - --

Feedback- Effectiveness

Fig. 5.11 A Model of the end-means analysis

5.10 CRITICAL SUCCESS FACTORS (CSFs)

--- - - - -- - - - - - - - --
Critical Success Factors are a small number ofeasily identifiable operational goals shaped
by the industry, the firm, the manager and the broader environment that are believed to
assure the success of an organization. Ifthese goals arc achieved, then the organization's
success is a<;sured. The CSFs arc, therefore, used to determine the information requirements
ofan organization.

124
Unit 5 Infom1ation

The CSF technique involves a two step process of eliciting the critical factors and then
deriving infonnation requirements. lbis can be used at both the organization as well as
application level.

For arriving at tl::e CSFs, the personal interview technique is generally used. The interviews
are generally confined to the Top/Senior Executives. The personal CSFs are then aggregated
to arrive at the o;;ganizational CSFs, which in tum bring out the information requirements.
Refer to Table 5.4

Table 5.4 Critical Success Factors : The Pros and Cons

Pros ICons ·-
• It produces a smaller data set • The data may be simply aggregated
toanalyLe. without any rigor I analysis.
-
• There is a clear focus. • There could be, generally, confusion
between individual and organi'l.ational
CSFs.
• It can be customized and tailor-made • It may be biased towards Top
to suit specific industry/organi'lation. I Manager.
I

• It takes into account the changing • It may not necessarily overcome the
environment. impact of a changing environment or
changes in manager.
• It may help bring about consensus • Undue emphasis on higher level of
among the Top Management. hierarchy at the cost oflower level
functionaries.
-

5.11 BUSINESS SYSTEMS PLA.~~NG (BSP)

- - -
The BSP method, also called, Enterprise Analysis, is a comprehensive methodology
developed by the IBM in 1960s explicitly for establishing the relationship among large
system development projects.
This method encompasses an analysis of organi7.ation-wise infonnation requirements by
looking at the entire organil".ation in terms of organization units functions, processes and
data elements. It helps identifY the key entities and attributes in the organization's data.
The BSP is typically top-down, process-based method of determining information
requirements as also information architectures. Refer to Table 5.5.

125
 Management lnfonnation Systems

Table 5.5 Business Systems Planning : The Pros and Cons

- -
Pros Cons

• It gives a comprehensive view ofthe • It produces an enormous amount of

organization and ofsystems/data data
uses/gaps.
• It is especially suitable for start-up or • The data collection is expensive
mac:;sive change situations.
--
• It helps to produce an organization- • It is difficult to use/analy.te all the data
wideconsensus by involving a large collected.
number of managers and users of data
• It helps managers think about • Focus on use ofexisting/available
information and its users information rather than on critical
objectives ofmanagement.

The various steps involved in the Business System Planning or Enterprise Analysis method
arc:-

Gaining the Commitment

Preparing for the Study
Starting the Study
Defining Business Processes
Defining Data Classes
Analyzing current systems support
Determining the Executive perspective
Defining findings and conclusions
Developing recommendations & action plan
Reporting Results

Refer to Fig. 5.12.

126
Unit 5 Information

c Gaining the Commitment

i
J
I Preparing for the Study
~
~
I Starting the Study J
I Defining Business Processes
~
~
I Defining Data Classes
~
i
c~- Analysing current systems support

•
Determining the Executive perspective

C_ Defining findings and conclusions

I
, - - -- - -.. ~L---- t -----,
Reviewing Information 1 ~ing InformationArchitecture j

r
Resource Manageme~
- t -------~
Defining Architecture Prioritic~ J

I D~veloping recommendations & action planl

t
Reporting Results

Fig. 5.12 Steps in defining a proposed information architecture in Business

Systems Planning

(Source : Business Systems Planning - Information Systems Planning Guide, Third Edition, Ci£20-
0527, IBM Corporation, 983, p. 25)

In addition to the major methods discussed earlier, there are certain other methods for
determining information requirement a<; follows :
• NormativeAnalysis
• DecisionAnalysis

127
 Management Information Systems

• Strategy Set Transformation

• Socio-technicalAnalysis
• Process Analysis
• Input-Process-OutputAnalysis

5.12 SUMMARY

Information is not only relevant but also critical for the decision maker as the quality of
decision making is dependent on the quality of information. Information can either be
extracted from primary data or secondary data. While designing MIS, due regard should
be given to the communication theory oftransmitting the information from the sources of
the destination.

Human capacity to accept inputs and offer outputs is rather limited. Ifthere is too much of
input, the human capacity will simply be unable to accept the input and correspondingly,
the output will also be reduced/restricted. This "too much of inputs" affecting the output is
considered as "overloading". To avoid overloading, filtering process should be adopted

Critical Success Factors are a small number ofeasily identifiable operational goals shaped
by the industry, the firm, the manager and the broader environment that arc believed to
assure the success of an organization. Ifthese goals arc achieved, then the organization's
success is assured. The CSFs arc, therefore, used to determine the information requirements
of an organization.

The BSP method, also called, Enterprise Analysis, this method encompasses an analysis
oforganization-wise information requirements by looking at the entire organif.ation in terms
oforganization units functions, processes and data elements. It helps identify the key entities
and attributes in the organization's data.

The BSP is typically top-down, process-based method of determining information

requirements as also infotmation architectures.

128
 Management Information Systems

6.1 ~TRODUCTIO~

In the 1970s, a number ofbusiness organil'.ations began developing information systems,

which were significantly different from the infonnation syswms then in use. The new systems
involved spending less resources - both human and financial. The new systems were
interactive and were designed to help specific end-users utilize data and models to discuss
and divide- not solve- semi structured and, unstructured problems.

These systems were called the Decision Support Systems and, by the end- 1980s, were
extended to groups and entire organizations.

The Decision Support Systems are interactive information systems, that rely on an integrated
set ofuser-fiiendly hardware and software tools to produce and present information that
is targeted to support the management in the decision making process.

The Decision Support Systems assist management decision-making by combining data,

sophisticated analytical models and user-friendly soHware into a single powerful system
that can support semi-structured or unstructured decision making. The Decision Support
System is under user control, from early inception to tina) implementation and daily use.
Decision Support System helps to close the information gap to enable managers to improve
quality oftheir decisions.

While MIS is considered useful for structured decisions. Decision Support System (DSS)
is considered to be more useful for decisions at the tactical/strategic levels, where decision
makers are often confronted with complex decisions which arc beyond their human abilities
to synthesize properly the factors involved.

DSS refers to a class of systems which support in the process of decision making and
docs not always give a decision itself. These systems can be used to validate decision by
performing sensitivity analysis on various parameters ofthe problem.

6.2 COMPONENTS OF DSS

The DSS has three basic components :

1. The Database

2. A Model Base

3. DSS Software System

134
Unit 6 Decision Support System

l. The Database

The DSS database is a collection of current or historical data from a number of

applications or groups. It is organized in such a manner that it provides easy access
for a range of applications. Adequate precaution is taken to ensure the data integrity
while controlling the pro..;essing that keeps the data current. DSS do not create or
update data, but rather use live organizational data so that the decisions could be
taken based upon actual Cl nditions. It would also be imperative to remember that
most DSS do not have dired access to organizational data but usually use data that
have been extracted from r~tC\ant databases- both internal and external- and stored
specifically for the DSS.

2. The Modelbase

A model is an abstract rep~escmation that illustrates the components or relationships

ofa phenomenon. A mode' can !)e physical model, a mathematical model or a verbal
model.

DSS can and does make us~ of uifferent types of models. The models could be
broadly classified into three t) pes Refer to Fig. 6.1 .

. ~ision Support System

* ..----*,.____
!Beha~o~l ~tanagement l Operations l
~d~ Science _ lodel Research Mod~ j

Fig. 6.1 Different _ lodel of DSS

a. Behavioral Model : The locus ofbeha,;om! models ofDSS is on studying I

understanding the behavior/trends amongst~ variables. Decision could then
be arrived at with due regards to such beha'iornl relationships.

Trend Analysis, Fon.:casting. Co-relation. Regression arc examples ofBehavioral

Models ofDSS.

b. Management Science ~odel : These models are developed based upon the
Principles ofManag~ment. ManagementAccomuing and Econometrics, among
others.

135
 Management Information Systems

Budgetary Systems, CostAccounting, Capital Budgeting, Inventory ~anagement

etc. are examples of Management Science Model ofDSS among others.

c. Operations Research Model : 'Operations Research' is basically application of

mathematical fommlae for arriving at optimum solutions. As such Operations
Research Models are mainly mathematical models. These models represent real
life problems/ situations in terms of variables and parameters expressed in
algebraic equations form.

Linear Programming, ABC Analysis, Mathematical Programming Techniques,

Material Requirement Planning arc some ofthc examples oftbe Operations
Research Model.

3. The DSS Software System : The DSS Software System permits easy interaction
between the users ofthe system and the DSS databa..c;e and modelbase. The DSS
software system manages the creation, stomgc and retrieval of models in the
modelbase and integrates them with the data in the DSS database. The DSS software
system also provides a graphic, easy to use, flexible user interface that supports the
dialogue between the users and the DSS.

Development of DSS and Desirable Characteristics of DSS

While developing DSS, the focus must be on idcntifying a problem and a set ofcapabilities
that users consider useful in arriving at decisions about that problem.

While developing DSS, therefore, care must be taken to ensure that the DSS possess the
following desirable characteristics :
1. Should aid the decision maker in decision making.
2. Should be able to address semi/un-structured decision making situations.
3. Should support decision makers particularly at tactical/strdtegic levels.
4. Should be able to create general purpose models, simulation capabilities and othc
analytical tools available to decision maker.
5. Should enable users to usc DSS without assistance from MTS/Technical professionals.
6. Should be readily adapted to meet information requirement for any decision
environment
7. Should provide mechanism to enable rapid response to a decision maker's request
for information.

136
Cnit 6 Decision Support System

8. Should have capability to interlace with corporate database.

9. Should be flexible to accommodate variety ofmanagement styles.
10. Should facilitate communication between/among various levels of decision making.
11. Should have in-built flexibility and ability to evolve as user-sophistication grows.
12. Using of interactive methods arc better advised.

DSS Approach and Core Capabilities

DSS lays, emphasis on providing capabilities to answer questions ,such as what is? why?
what if? what is best? what is good enough? Refer to Table 6.1.

Table 6.1 Summarization ofDSS approach

--
loss Provides Answers to questions
fRaw data and status access What is?
f-
GeneralAnalysis capabilities What is? or Why?
f.- ---
Casual Models i.e . forecasting, diagnosis. Why? What if?
- - -
Solutions suggestl ons, evaluation What is best? What is good enough?
- --
Solution selection

(Source : Tuchan E. Decision Support .s:vstems and Expert Systems, 1995)

To be able to provide the answers to questions as mentioned earlier, the DSS requires
four core capabilities as illustrated hereafter. Refer to Table 6.2.

Table 6.2 Core capabilities of DSS

Representations Conceptualization of information used in making decisions, such as

graphs, charts, lists, reports and symbols.
Operations Logical and mathematical manipulations ofdata such a<> assigning risks
and values, simulating alternatives etc. J
Memory Aids Data bases, views of data, work space, libraries and other capabilities
to refresh/update memory.
---
Control Aids Capability which allows user to control the DSS activities like sofh.,cue
permitting user control ofmemory representations, operations. training,
L ~torials, menus, function keys, help commands etc. I
137
 Management Information Systems

6.3 FACTORS INFLUENCING SUCCESS AND FAILURE L~ DSS

The following factors are considered critical for the success/H"iilure ofthe Decision Support
System: ·

1. UserTraining!Jnvolvement
2. User Experience
3. Length ofUse (Familiarity)
4. Top Management Support
5. Orientation toward Top Management
6. Novelty ofApplication
7. Return on Investment

(Success has been perceived here -to quote Alavi and Toachimsthaler (1998} and Sanders
and Courtney, 1985)- as "perceived improvement in decision making and overall satisfaction
with the DSS.")

£5 Activity A :
How do you think implementing a DSS in an organization would change the working of
the organization? Explain with the help ofan example.

Table 6.3 Comparison between MIS & DSS

.--M
- I_
S_ _ _ _ DSS I - - -- - - - ,

The focus is on structured tasks and 1 Focus is on semi/unstructured tasks, which

routine decisions. require managerial judgment.
Identifies information requirement. Establishes tools to be used for decision
process.

138
Unit 6 Decision Support System

-
Emphasis is on data storage. Emphasis is on data manipulation.
Delivers system based on frozen Follows iterative process hence ~urrcnt
requirements data.can be used.
-
Provides only indirect access to data Managers have direct access to data.
by managers
Reliance on computer expert. Reliance on managerial judgment I

-
Access to data possibly requiring a Direct access to computer and data. Hence I
'wait' for manager's turn. no wait.
MIS manager may not completely Manager knowing nature ofdecision
understand the nature of decision. and decision making environment
Emphasis is on efficiency. Emphasis is on effectiveness

The Structure OfDSS

DSS is composed of four major components :

1. The Database and its Management.
2. The Modelbasc and its Management.
3. The Hardware.
4. The User System Interface.

Fundamental DSS Program Structure

Users interface with the Dialogue Management components, which is a set of programs
that manages the user interface and translates the user's request<; into commands for the
other two components.

The Model Management component maintains and executes models ofbusiness activity.
Examples of such models arc spreadsheets, financial models and simulation models. It is
used to create, store and modify models and to cause them to be involved. The Data
Management component maintains DSS data. Its tasks include managing the DSS database,
which contains both intermediary and final results ofDSS studies and managing interfaces
to enterprise data, which is external to the DSS and data from external sources. Refer to
Fig. 6.2.

139
 Management Information Systems

Model
Base

USER

Fig. 6.2 : Fundamental DSS Program Structure

Components of DSS Programs

1. Dialogue Management : It has three sub-systems. The user interface sub-system
manages the physical user interface. It controls the appearance ofthe screen, accepts
input from the user and displays the results. It also checks the user commands for
correct syntax. The dialogue control sub-system maintains a processing context with
the user.

140
Unit 6 Decision Support System

The request translator is to translate the user command into actions for the model
management or data management component<> into a format understandable by the user.
Since flexibility and case ofusc arc important in DSS, GUls arc becoming the standard
for DSS applications. Database is normally through SQL.
2. Model Management: The command processor receives the commands from the
dialogue management components and delivers those commands from the dialogue
management components to either the model base management system or the mode
execution system. Refer to Fig. 6.3.

b. Model :vtanagcmcnt

Fig. 6.3 Components ofDSS Program

14l
 Management lnfonnation Systems

3. Database Management: Two functions for this are first, it stores and manipulates the
database as directed by either the model management component or the dialogue
management component. Secondly, it maintains an interface with data sources that
are external to the DSS viz. TPS database, inter enterprise systems, external data
utilities and other DSS applications.

6.4 TYPES OF DSS

I. Status inquiry systems

2. Data analysis systems
3. lnfommtion analysis systems
4. Accountingsystems
5. Model based systems

1. Status inquiry systems

The number of decisions in the operational management and some at the middle
management arc such that they are based on one or two aspect of decision making
situation. It docs not call for any elaborate computation, analysis, choice. If the
status is known the decision is automatic

2. Data analysis system

Decision systems are based on comparative analysis and make use offormula or an
algorithm. These processes arc not structured. The usc of simple data processing
tools and business rules arc required to develop this system

Example ' personnel inventory system, cash flow analysis

3. Information analysis system

Data is analyzed and the information reports arc generated. Reports can have
exceptions. These reports are used to assessmer.t of situation
Example sales analysis, accounts receivable etc.

4. Accounting system
These systems are not necessarily required for decision making by they arc desirable
to keep track of the major aspects of the business or a function. These systems

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Unit 6 Decision Support System

account items such as cash, inventory, personnel and relate it to a norm or norms
developed b the management, for control and decision.

5. Model based system

These systems arc simulation models or optimization models for decision making.
These decisions, generally are one time and infrequent and provide general guidelines
for operation or management.
Examples' Product mix, job scheduling rules etc. Refer to Table 6.4.

Table 6.4 Decision and type of system required

Decision Type of system required I

I Selection ofvendor Inquiry System
i

l Procure~ent Inquiry System

1
Pricing Data analysis
- - - ---
Selection ofvendor based on price, Information analysis system
quality, performance
-
Selection of capital asset Return on investment analysis system
Inventory rationalization Valuation of inventory and accounting system
- -
· ----
Management ofinventory within Inventory optimi.,.ation model
various financial and stocking
constraint-; I
j
---- -

£S Activity B:
What would be the consequence if a DSS fails in an organization?

- - - - ··- - -

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 ~anagl!ml!nt Infonnation Systems

6.5 GROUP DECISION SUPPORT SYSTEMS

Earlier we have discussed the vmious aspects ofDecision Support System (DSS), where
the respective executive/decision-maker arrives at effective decisions by using a Decision
Support System Thus, the DSS is designed for and used more by the individual decision-
maker.

It was, however, felt that in the contemporary business environment, decision-makers

have to increasingly work in groups as Group-working I Group Decision-making has
certain advantages like :
(a) More comprehensive consideration ofthe problems and related issues.
(b) Better group understanding ofthe problem and rationale for the decision.
(c) Reduced likelihood of"quibbling" using "20/20 hindsight".
(d) Greater Group Commitment to the decision.
(e) Improved communication to/with the implementers ensuring better implementation.

Hence, the DSS application was suitably extended/expanded to facilitate Group Decision
Environment and the DSS for a group came to be known as the Group Decision Support
System (GDSS). 1t is also referred to as a Group Support System or a Computerised
Collaborative Work System (CCWS). We would, however, refer to this extendedlexpm1ded
form ofDSS as the GDSS.

Under the GDSS Environment, the members ofthe group utilize the DSS as a group and
the user-interface is expanded to include the computers which are suitably connected I
networked. In this way, under the GDSS, members ofthe group can communicate using
their computers with DSS or with other members ofthe group to facilitate optimal decision-
making.

What is GDSS?

We have discussed what a GDSS is like. Let us now note the specific defmition ofGDSS.

According to De Sanctis and Gallupe, "GDSS is an interactive computer-based system

that facilitates the solution ofunstructured problems by a set ofdecision-makers working
together as a group".

GDSS Components

The GDSS components are similar to that ofthe DSS components. The GDSS has three

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Unit 6 Decision Support System

basic components viz. the Hardware, the Software, the People and Procedure, as illustrated
hereafter:

Hardware • Input/Output device.<>

• Audio Visual Instruments
• Electronic Display Board/Screens
• Computer Equipments
• Conferencing Infrastructure
• Network Systems enabling the linking ofdifferent sites/locations
and participants to each other.
Software • Database and DBMS
(Generally referred • Modeling Capabilities
as a "Groupware" • Dialogue Management with multiple-user access.
or "Workgroup • Specialized Application Programmes to facilitate group access
Software")
People and • Trained Facilitator/s
Procedure • Decision-making participant-;
• Support Staff
• Laid down procedure and modus operandi

In addition, communication technology would be the most important component to facilitate

participation by the group members from various sites/locations. Care must, however, be
taken to ensure that the technology supports the group and does not dominate it.

GDSS Configuration

The typical GDSS configuration can be illustrated in Fig. 6.4.

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 Management lnfonnation Systems

Model
Database
Base

' GDSS
Software

Access to External
intra/internet, ElCternal
Database
network and Database
Access
computer systems

Dialogue
Manager

User

Fig. 6.4 GDSS configuration

The GDSS Features

As the GDSS is a group decision-facilitator and extension/expansion ofDSS, most ofthc

features/characteristics of the GDSS arc similar to that ofthe DSS.

In addition, GDSS must provide for-

(a) Anonymous inputs without identifying the source of inputs to enable group decision-
makers to concentrate on the merits ofthe input without considering who gave it.

(b) Parallel communication/s to enable every group member to address issues or make
comment~suggestions simultaneously.

(c) Automated record keeping by anonymously recording each comment that is entered
into the PC by the group member, for future review and analysis.

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Unit 6 Decision Support System

Factors in GDSS Success

The success ofGDSS would depend upon the quality ofthe meetings/discussions/ interface
being "productive", ensuring more effective and efficient use oftime and ability ofthe
group-members to produce the desired results in fewer meetings/interfaces.

This, in turn, would depend upon the following clements :

(a) Improved pre-planning.
(b) Increased participation.
(c) Open, collaborative meeting/s atmosphere.
(d) Criticism-free idea generation.
(e) Idea organi'la.tion and evaluation.
(f) Setting priorities and making decisions accordingly.
(g) Documentation/Record keeping ofmeetings.
(h) Access to external information, ifand when required.
(i) Preservation of'organi7a.tion memory'.

fe'S Activity. C :
How would a GDSS help when more than one decision maker had to make a decision?

6.6 EXECUTIVE INFORMATION SYSTEM I EXECUTIVE SUPPORT

SYSTEM (EIS I ESS)
--------------------- - -----
The Executive Information System/Executive Support System (EIS/ESS, for short) is a
relatively new decision-facilitating technology. EIS/ESS has emerged in response to the
emerging dynamic situation where the Top Executives are bombarded with huge amount
of data, effectively leading to "Information Overload" with the resultant understandable
confusions and dilemma.

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 Management Infonnation Systems

Why EIS/ESS?

EISIESS emerged, indeed the emergence became imperative, due to various factors both
internal and external, obtaining in the corporate operating environment world-wide.

According to Watson and others, EISIESS has become imperative due to certain internal
and external factors as enumerated hereafter :

1. Internal Factors
• Necdfortimclyinformation.
• Need for improved communications.
• Need for access to operational data,
• Need for rapid status updates on various business activities
• Need for access to corporate database
• Need for more accurate information
• Need for ability to identifY historical trends

2. External Factors
• Increasing and intensifying global competition.
• Rapidly changing business environment,
• Need to be more pro-active.
• Need to access external database.
• Increasing Government regulations (though active Government Role is shrinking).

EISIESS is developed to support decision-making actions/processes at the Top Executive/

Management level. EIS/ESS is used by the Top Executives as they require specialized
support when/while making strategic decisions. EIS/ESS is required and used at fairly
senior level including members ofthe Board ofDirectors and executives with the titles of
ChiefExecutive Officer (CEO), ChiefOperating/Operations Officer (COO), ChicfFinancc
Officer (CPO) and the like.

While, earlier, most ofthe Top Executives were reluctant users oflnformation Technology,
the new generation oftech-savvy Top Executives are not only open to, but actually expect,
support from Computer-Based Information Systems like EIS/ESS.

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Unit 6 Decision Support System

Accordingly, many organi7.ations have gone in for development ofEIS/ESS to assist Top
Executives decision-making. Looking at EIS/ESS from a historical perspective, the findings
of a study carried out/released by the Center for Information Systems Research (CISR) at
the MIT, C.S.A., would be quite interesting. In 1986, when the study was released, about
30% oflarge U.S. Cmporations had EIS/ESS developed/installed. This figure had grown
to more than 50% in 1989. EIS/ESS is presently observed to be effective in practically all
major corporations worth their names.

What is EIS/ESS?

EIS/ESS is, in a way, specialized DSS that includes all hardware, software, data, procedures
and people used to assist senior/top level executives within the organization. The primary
goal of EIS/ESS is to obtain data from a variety of sources, integrate and aggregate that
data and display the resulting information in an easy-to-use comprehensible format.

EIS/ESS mean different things to different people.

While there are different dcfmitions ofElS and ESS, for all practical purposes the terms
arc used interchangeably. And, in this text, except for noting the different definitions, we
too are going to usc the terms interchangeably. We would be using the tenns EIS and ESS
interchangeably as the characteristics, capabilitjes and users are almost identical.

EIS Definition

An EIS is "a computer-based system that serves the information needs ofTop Executives.
It provides rapid access to timely information and direct access to Management Reports.
It is very user-friendly and is supported by graphics, providing Exception Reporting and
Drill Down capabilities. It can also be easily connected with on-line information services
and electronic mail".

(Drill Down capability is an important capability that enables the users to break down data
in details. It enables users to identify both problems and opportunities).

An EIS is "a computer-based information system that combines the decision-maker's

imagination and judgment with the computer's ability to store, retrieve, manipulate, compute
and report internal and external information".
t

ESS Definition

An ESS is "a comprehensive executive support system that goes beyond the EIS to include
communications, office automation, analysis support and intelligence",

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 Management Information Systems

EIS/ESS Characteristics

Broadly, for the sake of convenience, the characteristics could be divided into three
categories :

1. Informational Characteristics
• Flexibility and ease ofuse.
• Provides timely information with short response-time and quick retrieval.
• Produces correct information.
• Produces relevant information.
• Produces validated information.

2. User-Interface/Orientation Characteristics
• Contains sophisticated 'self-help', user-friendly interfaces including Graphic User
Interface (GUI).
• Facilitates access from many places.
• Provides secure, reliable and confidential access and access procedure.
• Is customized I tailor-made to suit the management style ofindividual executives.

3. Managerial/Executive Characteristics

• Provides support for defining overall Vision, Mission and Strategy as it has a
strategic/futuristic orientation.
• Provides support for Strategic Management (Strategic Planning/Organising/
Control/Staffmg etc.).
• Can help with situations that have a high degree ofrisk/uncertainty.
• Is linked with value-added business processes.
• Supports the need/access for/to the External Data/Databases,
• 1las capabilities like 'Drill Down', 'Exception Reporting' and 'Critical Success
Factors' identification.
• Has a high Result/Performance Orientation.

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t: nit 6 Decision Support System

EISIESS Capabilities

1. It provides access to aggregated/macro/global information.

2. It enables the user to use external data extensively.
3. It enables to address ad hoc queries/analysis.
4. It incorporates graphic and text in the same display to provide better view.
5. It shows trends, ratios and deviations.
6. It provides access to historical as also the latest data,
7. (t highlights problem indicators and supports open-ended problem explanation with
written interpretations.
8. It is organized around critical success factors and provides "Management by
Exception" Reports.
9. The information can be presented in a hierarchical structure, thereby facilitating detailed
information at various levels, along with Drill Down capabilities.
10. It filters, compresses and tracks critical data and also provides forecasting capability.
11. It can utilize hypertext and hypennedia.
12. It provides a generalized computing and telecommunications capacity that can be
applied to a changing array ofproblems.

EIS/ESS Benefits

With the type of capabilities, as mentioned earlier, the ETS/ESS confers lots ofbenefits
upon the users- both individual and corporate. EIS/ESS can be summarized as follows:

1. Facilitates the attainment oforganizational objectives.

2. Facilitates access to information by integrating many sources of data and
provides broad, highly aggregated infonnation. This, in tum, facilitates broad,
aggregated 'perspective' and 'context'.
3. Improves the users 'productivity' by enabling more efiective decision-making.
4. Allows the anticipation ofproblems/opportunities and facilitates pro-active rather
than a re-active response.
5. Increases communication capability and quality.
6. Facilitates better Strategic Planning and Control.

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 Management Infom1ation Systems

7. Facilitates finding the cause of a problem in a "Root-Cause Analysis" mode rather

than 'Fix-it mode'.
8. Meets the needs ofthe executives in time-effective and timc-cflicient manner.
9. According to Rockart and Treacy, EISIESS also helps in providing answers to
questions like :
(a) What business the organi7ation should be in?
(b) What arc the competitors doing?
(c) What new acquisitions/activities would protect the organization from
Business Cycles/Business Swings?
(d) Which unite; should the organization divcst/spin-oJT to raise cash for
further expansion/diversification I acquisition ?
10. The EIS/ESS provides competitive advantage.
11. The most important benefit, of course, is that EIS/ESS encourages the
development of a more open and active Information Culture, as EISIESS
improves the use of the strategic information resource that arc at the disposal of
the organization for working out both strategic and tactical decisions.

6. 7 EXPERT SYSTEMS

Expert Systems arc among the most exciting computer applications to emerge during the
1980s. The first acclaimed commercial 'Expert System', DEC's 'XCON', was put into use
in 1981. Expert Systems Building Tools (like WAX, OPSS, 'Expert Ease, KEE, 5.1)
were first offered for sale around 1983. The number of successfully fielded expert systems
mushroomed since 1984 as high level development tools became widely available.

While the years 1985 and 1986 were real 'HOT' years for Expert System, 1987 and
1988 were relatively 'COLD' years as regards the market response to the Expert System.
The market has since matured and the 1990s witnessed increasing acceptance and
applications/uses of expert system to transform the way corporations developed their
software and used computers for managing their business.

The ES technology basically derives limn the research discipline ofArtificial Intelligence,
a branch ofcomputer science concerned with the design and implementation ofprogrammes
which arc capable of emulating human cognitive skillc; such as problem- solving, visual
perception and language understanding.

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Unit 6 Decision Support System

Expert System mimic human expertise in a narrow domain to solve specific problems in a
well-defined area.

Expert Systems : Definitions

An Expert System has been defined differently by different people. As such, there is no
precise definition of an Expert System that is guaranteed to satisfy every one.

However, while in a narrower perspective, ES technologies make computer programming

easier and more eflective, in a broader perspective, ES represents the first step in a process
that will transform computing by moving programming technologies beyond numerical
programming into a realm oflogical, symbolic programming.

More specifically, the following definitions could be noted.

According to Peter Jackson, "An Expert System is a computer programme that represents
and reasons with knowledge of some subject specialist with a view to solving problems or
giving advice".

Robert Bowerman and David Glover have defined Expert System as, "Highly specialized
computer systems capable of simulating that clement of a human specialist's knowledge
and reasoning that can be formulated into knowledge chunks, characterized by a set of
facts and heuristic rules". (Heuristic Rules arc rules of thumb accumulated by a human
expert through intensive problem-solving in the domain of a particular task).

According to Bruce Buchanan and Reid Smith, an Expert System is a computer program
that -
(a) Reasons with domain-specific knowledge that is symbolic as well as numerical.
(b) Uses domain-specific methods that are heuristic (plausible) as well as following
procedures that arc algorithmic (certain).
(c) Performs well in the problem area.
(d) Explains or makes understandable both what it knows and the reasons for its
answers.
(e) Retains "flexibility".

Expert System, according to Hossein Bidgoli, "is a series of computer programmes that
attempt to mimic human thought, behavior in a specific area that ha<> successfully been
solved by human experts".

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 Management Information Systems

Expert System Components

The various components ofthe Expert System could be illustrated in Fig. 6.5.

+-- ____ ___. 1.-;;-rer~nce

~ n gme

User
Interface
Knowledge
Advice and Base
explanation

Acquisition
Facility

Experts
Fig. 6.5 : ES Components

Expert Systems : Capabilities

To be really effective and improve the quality ofproblem-solving, an Expert System should
possess the following capabilities :
1. Capturing ofexpertise
2. Codifying the expertise
3. Duplicating and transferring the expertise
4. Saving the human expert's time
5. Saving on maintenance and updating ofthe knowledge base.

Expert Systems : Characteristics

Ralph Stair and George Reynolds have identified the following characteristics ofthe Expert
System:
1. Ability to explain their reasoning or suggested decisions.

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Unit 6 Decision Support System

2. Ability to display "Intelligent" behaviour.

3. Ability to draw conclusions from complex relationship.
4. Ability to provide 'Portable Knowledge'.
5. Ability to deal with certainty.
6. Not widely used or tested, due to difficulty ofusc.
7. Limited to relatively narrow problems.
8. Inability to deal with 'Mixed Knowledge'.
9. Inability to refine own knowledge base.
10. Difficult to maintain.

Expert Systems Applications

Expert Systems can be used to solve problems in practically every field and discipline.
Such systems can also help in various stages ofproblem-solving process. As such, Expert
Systems have been developed for a variety of complex applications. A few illustrative
applications ofExpert Systems arc :
1. Aerospace Technology (NASA)
2. Airline/Civil Aviation (Scheduling/Routing)
3. Banking and Finance (Viz. Credit Card limits)
4. Criminology
5. Education
6. Food Industry
Health Care Management (e.g. Diagnosing Blood Infections)
8. Manufacturing Design and Assembly
9. Geological Data Analysis and interpretation for oil exploration drilling sites
10. Personnel Management
11 . Security Analysis/Portfolio Management

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 Management Information Systems

12. Tax Planning

13. Foreign Exchange Management

14. Gene-Cloning Experiments

15. Troubleshooting Telephone Network
16. Configuring Computer Systems
17. Strategic Goal Setting
18. Quality Control and Monitoring

Expert Systems : Limitations

1. Expert Systems function in the domain ofextracted, cognitive, logical thinking

process. As such, ES are not generally adept at managing highly sophisticated
sensory inputs.

2. As ES are based on a narrow range of codified domain, they may not be able to
tackle multi-dimensional problems.

3. Due to the narrow range ofknowledge incorporated in the ES, they typically do
not respond well to situations outside their range of expertise. Hence, they remain
what they are - Machine Experts!

4. Typical ES may not be able to make available common sense knowledge and
broad-ranging contextual information/s.

5. ES typically lack human self-awareness and self-analysis tools. Introspection is

not available as ES also happen to be "non-self:.referral" systems.

6. If a problem is not specific and has not been solved previously by an expert, or a
number of experts, then that problem is not considered suitable for the Expert
Systems implementation.

ES are capable of performing only within a specific, logical-oriented realm of expertise.

And herein lies the major limitation of the Expert Systems, as computers basically onl~
have memory and not, necessarily, intelligence!

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Unit 6 Decision Support System

When to go in for Expert Systems ?

Expertise, as we all know, has both its price as well as value. No wonder then that it is
difficult, expensive and time-consmning to develop sophisticated Expert System. It would,
therefore, be desirable to weigh the following aspects/considerations before an organization
decides to opt for Expert System.:

1. Will the system help reduce risk significantly?

2. Will the system provide a high pay-off?

3. Will the system performance be more consistent than human experts?

4. Will the system enable the expertise to be made available at multiple locations
simultaneously?

5. Is the expertise really rare or expensive?

6. Will the system enable developing the solution faster than human experts?

RS..Activicy_D_:.
Are websites such as doctorsonline.com and astrology.com examples ofexpert system?
Justify your answers?

- -- -- -· -- -- -

6.8 ARTIFICIAL INTELLIGENCE

Artificial Intelligence (AI) is an area which has over half a century of history. AI began in
earnest with the emergence of the computers during the late 1940s. It was the ability of
these machines to store large amount of data and process it into information at very high
speeds, hitherto unimaginable, that gave researchers the vision ofbuilding systems which
could imitate/emulate some, ifnot all, human abilities.

While some ground work had already been initiated earlier, it was not w1til the 1980s that
AI received popular economic and managerial acclaim. It was during this period thatAl
went through the transition from a primary research area to potential commercial

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applications. It was only then that AI was accepted as an emerging technology and as such
attracted considerable attention.

AI system docs not replace people. They liberate experts from solving common/simple
problems, leaving the experts to solve complex problems. AI system help to avoid making
same mistakes, and to respond quickly and effectively to a new problem situation.

What is Artificial Intelligence?

Artificial Intelligence (Al) is bao;;ically a technology which helps/facilitates the application of

computers to areas that require knowledge, perception, reasoning, understanding and
cognitive abilities which distinguish the human behaviour from machines like computers.

It is the science and engineering ofmaking intelligent machines, especially intelligent computer
programs. It is related to the similar task of using computers to understand human
intelligence.

Before moving into further discussion about Al, it would be desirable to compare and
understand the attributes of Natural (Human) Intelligence and Artificial (Machine)
Intelligence. Refer to Table 6.6.

Table 6.6 Comparison between Natural Intelligence and Artificial Intelligence

- --
Attributes ~atural Artificial
Intelligence Intelligence

Ability to use sensors (eyes, cars, touch, smell) High Low

Ability to be creative and imaginative I High Low
Ability to learn from past experiences High Low
Ability to be adaptive Iligh '
I
I .ow
Ability to afford the cost ofacquiring intelligence High I Low
Ability to use a variety ofinformation sources High High
-
Ability to acquire a large amount ofexternal information High I High
0 0
- ----
: Abthty to make complex calculatiOns Low Htgh
~~A__bi._li_ty_t_o_trans __a_ti_on________________~~ --
__'_fu_r_in_fu_nn I_.o_w__~____Ili~-~~1--~
' Ability to make a series of calculations, rapidly
and accurately Low High

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Unit 6 Decision Support Syst<::m

Pre-Requisites ofArtificial Intelligence

To be artificially intelligent and also be able to come out with human-like responses,
computer must possess the following requisite features :
1. Understand what is 'Common Sense'.
2. Understand 'Facts' and relationships among 'Facts'.
3. Be able to manipulate 'Qualitative' data.
4. Be able to deal with exceptions and discontinuity.
5. Be able to interface with humans ina "Free-Format" fa'lhion.
6. Be able to deal with new situations based on previous learning.

AI Defmitions

Al has been defined differently by different people. Let us, therefore, note the various AI
definitions,

"AI is a branch qfcomputer science that is concerned with the automation ofintelligent
behavior".
-George Luger and William Stabblefied

"AI is a series ofrelated technologies that attempt to simulate and reproduce human
behavior, including thinking, speaking, feeling and reasoning".
- Hussein Bidgoli

"AI is a branch ofcomputer science concerned with the study and creation ofcomputer
systems that exhibit some form of intelligence : Systems that learn new concepts
and tasks, systems that can reason and draw useful conclusions about the world
around us. systems that can understand natural languages and perceive and
comprehend a visual scene and systems that per:form other types offeats that require
human types qf intelligence".
- Dan Patterson

The AI Canvas

Al today not only focuses on computer science and computers, but encompa'iscs a group
of related technologies and specialty areas like-

• Expert Systems

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 Management Information Systems

• Fuzzy Logic
• IntelligentAgents
• Natural Language Processing

• Neural~etvvorks

• Robotics
• Speech Recognition
• Vision recognized Systems
• Learning System.<:>

Nielson, a pioneer in the area ofAI, likes to characterizes the various areas/components
ofAl in terms ofwhathe calls, "ONION "MODEL" as illustrated hereafter. Refer to Fig.
6.6.

Modelling and
Heuristic Representation
Search of Knowledge

AI Common
Language Sense
and Tools Reasoning
and Logic

Fig. 6.6 : The AI Onion Model

Artificial Intelligence Applications

While the technology aspects ofAI arc almost in place by now, initial applications have
clearly demonstrated that AI can provide great leverage for corporate organizations.

Some ofthe illustrative AI applications are as follows :

1. Manufacturing/Production Planning and Scheduling

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Unit 6 Decision Support System

2. Project Management
3. Factory Management
4. Sales, Distribution and Field Services
5. Diagnosis and Trouble-shooting
6. Financial Management
7. Currency/Interest Rates SWAPs
8. Portfolio Management
9. Asset Liability Management
10. Readingllnterpreting Financials
11. Criminology
12. Geology (Drilling/Oil Exploration Sites)

Precaution

Notwithstanding the advances in AI, it must be remembered that AI Systems are not to
replace human decision-making completely. They are meant to replicate emulate human
decision-making for certain types ofclearly and well-defined problems - the Chess Matches
between Gary Kasporov (Natural Intelligence) and Deep Junior (Artificial Intelligence)
being a classic example ofAllES.

Like other computer-based information systems, the overall purpose of Al systems/

applications in business is to help the organizations/managers achieve the goals.

AI has, no doubt, started getting acceptance and credibility. The success ofAI as a mass-
market technology, however, would depend upon a number of practical factors like :

1. Cost

2. Personnel with requisite skills

3. Corporate Management attributes, and MOST IMPORTANTLY,

4. The demonstration of a variety ofcommercial AI success stories to be a role model

for others to follow.

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~Activity E :

Who would perform an operation on a patience better, a doctor in blood and flesh or a
robot with AI? JustifY you answers?

6.9 SUMMARY

The Decision Support Systems arc interactive information systems, that rely on an integrated
set ofuser-friendly hardware and software tools to produce and present information that
is targeted to support the management in the decision making process. DSS is considered
to be more useful for decisions at the tacticaVstrategic levels of management. DSS
application when suitably extended/expanded to facilitate Group Decision Environment
and the DSS for a group is called as the Group Decision Support System (GDSS) or
Group Support System or a Computerized Collaborative Work System (CCWS).

The Executive Information System/Executive Support System is "a computer-based system

that serves the information needs ofTop Executives. It provides rapid access to timely
information and direct access to Management Reports. It is very user-friendly and is
supported by graphics, providing Exception Reporting and Drill Down capabilities. It can
also be easily connected with on-line information services and electronic mail".

The ES technology basically derives from the research discipline ofArtificial Intelligence,
a branch of computer science concerned with the design and implementation ofprograms
which arc capable of emulating human cognitive skills such as problem- solving, visual
perception and language understanding. Expert System mimic human expertise in a narrow
domain to solve specific problems in a well-defmed area.

Artificial Intelligence (Al) is basically a technology which helps/facilitates the application of

computers to areas that require knowledge, perception, reasoning, understanding and
cognitive abilities which distinguish the human behavior from machines like computers.

162