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Networking Technologies

UNIT 1 INFORMATION TECHNOLOGY:

AN OVERVIEW
Structure
1.1 Introduction
1.2 Objectives
1.3 Definitions of IT
1.4 Types of IT Systems
1.5 Business Perspective of IT
1.6 Internet and its Business Applications
1.7 Computer Aided Decision Making
1.8 Summary
1.9 Unit End Exercises
1.10 References and Suggested Further Readings

1.1 INTRODUCTION

Information Technology (IT) has become a strategic necessity. Unless we believe in

IT and act on it, there is every chance of becoming a footnote in the annals of
History. IT has become a vital component of successful businesses and organizations.
Managers are expected to identify opportunities to implement information systems to
improve the business processes. Managers are also required to lead IS projects in IT.

Information Technology has become a major facilitator of business activities. It is also

a catalyst of fundamental changes in the structure, operations and management of
organizations. IT can be used to:
1. Perform high-speed, high-volume, numeric computations.
2. Provide fast, accurate and inexpensive communication within and between
organizations.
3. Store huge amounts of data in an easy-to-access yet small space and allow quick
and easy access.
4. Automate semiautomatic business processes and manually done tasks.
IT has been used for improving productivity, reducing cost, enhancing decision
making process, enhancing customer relationships, and developing new strategic
applications. The business paradigm has completely shifted from being sellers market
to buyers market. Customers have become the focal point of any business. The
business environment is no more as stable as it used to be and has become much
more competitive. It became mandatory on the part of the organizations to make full
use of IT to survive. IT has become one of the standard components of an
organization.

The individuals are supported by IT to fulfill their roles. The management and the
business processes have become IT oriented. Organization structure and strategy are
also supported by IT. Whenever an external or internal pressure is felt by an
organization, IT helps the organization to plan critical response activities. The
changed government policy may create a pressure on an organization. But such a
pressure is distributed over a long period as government gives enough time to
organizations to respond to changed policies. But if there is a change in the behavior
of consumers, the organization should be able to identify the change. Moreover, they
1
Information Technology should be able to come up with a solution fast. IT helps an organization to anticipate
for Managers and stay ahead of problems. The organization can take proactive measures rather
than firefighting measures.
An organization can use an IT supported strategic system to increase their market
share. IT can help an organization negotiate better with their suppliers. Maintaining
and improving quality of products and processes in an organization needs regular
support, vigilance, and innovation. IT has been used extensively for productivity
improvement, reducing inventory and maintaining quality. Management Information
System (MIS) and decision support system (DSS) have been used to help
management in decision-making process.
Business process reengineering (BPR) has become the need to the day for every
business; BPR involves changing business processes in an innovative way. IT plays a
major role in BPR. Internet and Intranet help an organization in changing its business
processes to reduce cycle time and time to market a product. IT makes information
available to employees with different level of access. As a result, employees can be
given more independence to make decisions. The ERP, a strategic tool, heavily uses
IT to integrate business processes of an organization.

1.2 OBJECTIVES
After reading this unit, you should be able to:
• Define information technology and state the advancement of IT;
• Identify the different types of Information systems;
• Contextualize a business perspective of IT;
• Describe the significance of Internet and its business applications; and
• Explain the role of Computer Aided Decision System in business environment.

1.3 DEFINITIONS OF IT
Let us understand what information is. Information is the finished product for
which data is the raw material. The dictionary defines information as processed
data, which is used to trigger certain actions or gain understanding of what the
data implies.

Information has also been defined as data that have been put into a meaningful
and useful context and communicated to a recipient who uses it to make
decisions. Information involves the communication and reception of intelligence
or knowledge. It apprises and notifies; surprises and stimulates, reduces
uncertainty, reveals additional alternatives or helps eliminate irrelevant or poor
ones, and influences individuals and stimulates them to action. The information
must be received by the recipient within the required time frame and the information
must be free from errors.
The technology plays an important role in delivering timely and error free information
to its recipients. Technology includes hardware, software, databases, and
communication system. Hardware is a set of devices such as processor, monitors,
keyboard, and printer that accept data, process them, and display them. Software is a
set of programs that enable the hardware to process data. Database is also an
integral part of IT system, which is a collection of related files, tables, relation etc.
that stores data and the association among them. Network connects computing
resources of an organization and facilitates sharing of hardware and software. The
organization processes and people are integral part of an IT System.
Now we know what information is and what technology is. Now are ready for a
2 definition of IT.
Information Technology means the collection, storage, processing, Networking Technologies
dissemination, and use of Information. It is not confined to hardware and
software but acknowledges the importance of man and the goals he sets for his
technology, the values employed in making these choices, the assessment
criteria used to decide whether he is controlling the technology and is being
enriched by it.

Information Technology Serving Society, USA in 1979, has given the above definition.

The above definition clearly states that IT is an important tool, which must be used
properly. At one time, 60% people used to work in agriculture. Nowadays, in a
developed country, about 10% people work in agriculture and 40% people work in
information related fields. In a developed country such as US, 50% households have
computers and Internet connection. In India, only about 8 people out of every 1000
have access to computers. However, India is making steady progress.

As far as history of computing is concerned, people tried to invent a computing

machine as early as 800 BC. Abacus is one of the oldest computing devices that are
still in use. Every child in China learns to use abacus in school. Our ancestors had
built various other mechanical machines using gears. All these efforts laid foundation
for better computing machines. The diode tubes, transistors, integrated circuits (ICs)
and now very large integrated circuits (VLSI) are the electro-mechanical devices
that have been invented over a period of time. The technology has improved since
World War II many folds. The improved technology has been the key factor in
making better computing devices. Along with improvement in computing technology,
the communication technology has also improved in parallel. The software also
improved and became user friendly. The spreadsheets, the word processing
packages, database packages, simulation software packages, and decision support
systems made IT popular among managers as well. The terms Information Systems
(IS) and Information Technology (IT) are used synonymously. IS has evolved
considerably since 1960.
Activity A
Give examples from day-today activities in your organization or any organization of
your choice to support the statement, “Managers need only information and not
data”.
.............................................................................................................................

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1.4 TYPES OF INFORMATION SYSTEM

There are various types of information systems as listed below.

Transaction Processing Systems (TPS)

A TPS is used primarily for record keeping which is required in any organization to
conduct the business. Examples of TPS are sales order entry, payroll, and shipping
records etc. TPS is used for periodic report generation in a scheduled manner. TPS is
also used for producing reports on demand as well as exception reports. 3
Information Technology Decision Support System (DSS)
for Managers
DSS serves the management of an organization. A decision support system has
sophisticated data analysis tools, which support and assist all aspects of problem
specific decision-making. DSS may use data from external sources such as current
stock prices to enhance decision-making. DSS is used when the problem is complex
and the information needed to make the best decision is difficult to obtain and use.
DSS is developed with the help of decision makers. DSS helps in decision-making
process and does not make any decision.

Executive Information System (EIS)

An Executive Information System is also called Executive Support System. Senior
managers of an organization use the EIS. Therefore, it must be easy to use so that
executives can use it without any assistance. EIS can do trend analysis, exception
reporting and have drill down capabilities. The results are usually presented in a
graphical form tailored to executive’s information needs. EIS has on-line analysis
tools and they access a broad range of internal and external data.

Management Information Systems (MIS)

MIS provides the management routine summary of basic operations of the
organization. The basic operations are recorded by the TPS of the organization and
MIS consolidates the data on sales, production etc. MIS provides routine information
to managers and decision makers. The main objective behind installing an MIS in the
organization is to increase operational efficiency. MIS may support marketing,
production, finance etc.

Work Flow System

A workflow system is a rule based management system that directs, coordinates, and
monitors execution of an interrelated set of tasks arranged to form a business
process. A workflow system is also known as a document image management
system. For example, a workflow system is used by banks for loan sanction process.
An applicant fills out an electronic application form for a bank loan at a bank’s web
site. The application is then upload to the bank loan officer’s site. The loan officer
conducts an interview and fills in his feedback and passes the application form to the
credit check unit. The credit unit checks the credit limit and fills in the details. The
application is now complete and a final decision is made.

There are three types of workflow software. Administrative workflow systems focus
on the tracking of expense reports, travel requests, massages. An Ad-hoc workflow
system deals with the shaping of product, sales proposals, and strategic plans.
Production workflow systems are concerned with mortgage loans and insurance
claims. A workflow system may be Internet based and may be combined with e-mail.
A workflow system may be based on client/sever architecture that may use a
database/file server.

Enterprise Resource Planning (ERP)

ERP system is a set of integrated programs capable of managing a company’s vital
business operations for an entire multi-site, global organization.

Expert Systems
The system has the ability to make suggestions and act like an expert in a particular
field.

An expert system has an extensive knowledge base.

4
Networking Technologies
1.5 BUSINESS PERSPECTIVE OF IT
The impact of IT on a business has been tremendous. One of the advantages of IT
systems for a business is the cost-performance ratio, which is better in case of
computers. The labor cost increases every year but the cost of computer does not
increase. A better and more powerful computer can be bought for the same price
after a year. It is better to use computers for routine jobs as far as possible. The IT
has been used in every business and for every function of a business. Some of the
applications are as follows.
• Finance and Accounting : IT has been used for forecasting revenues,
determining the best sources and uses of funds and managing cash and other
financial resources. IT has also been used to analyze investments and perform
audits.
• Sales and Marketing : IT has been used to develop new services, which may
not exist without IT. IT has helped management of various organizations to
determine the best location for production and distribution facilities. The
operational data has been analyzed using IT to determine the best advertising and
sales approaches. The product prices have been set using IT to get the highest
total revenues. In other words, IT has been used for product analysis and price
analysis.
• Manufacturing : IT has been extensively used for processing customer orders,
controlling inventory levels, developing production schedules and for monitoring
product quality. A whole new discipline— Computer Aided Design and Computer
Aided Manufacturing has evolved due to application of IT to design and
manufacturing. The manufacturing is not what is used to be due to the use of
computers, Computer Integrated Manufacturing (CIM) dominates the
manufacturing sector.
• Human Resource Management : Companies are using IT systems for
screening applicants and conducting various tests.
• Project Management : A range of software packages are available in the
market for managing projects. These software products let the management set
the schedules, milestones, facilitate communication among group members, and
monitor the project progress. These products help in document and report
preparation.
• Data Analysis : Investment firms heavily use information systems to analyze
stocks, bonds and options to provide better service to their clients.
Activity B
Give examples to highlight the applications of IT in
• Public Relations
• Market research
• Purchasing
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5
Information Technology
for Managers 1.6 INTERNET AND ITS BUSINESS APPLICATIONS

The network technology had been developed during 1970s. The network hardware
and software improved as a result of research and investment. The network became
a reality and every organization laid network cables and connected their computers
and other resources to the network. Such a network is called Intranet. An Intranet is
restricted to an organization. When a network of networks is formed, it is called
Internet. In other words, Internet is a global network of computer networks. The
Internet connects computing resources of various organizations such as academic
institutes, business organizations and government organization. All networks, which
are part of the Internet, follow a protocol called TCP/IP protocol for communication.
Internet has affected business and people both. The Internet provides fast and
inexpensive communication channels. The Internet is used for transferring data files,
e-mail messages and for sharing documents and images. Internet is also used for
chatting. There are news groups, which use Internet to share ideas. People, sitting
miles apart, work on the same project making use of Internet to exchange ideas in
real time. The Internet is also used for education and entertainment.

The Internet has changed the way business is done. A new business paradigm termed
electronic commerce has come into existence. We will discuss e-commerce in some
detail little later. Consumers are able to shop for goods and services from all over the
world in the comfort of their homes. The individuals are able to shop, bank, work, and
entertain themselves without leaving their homes. The payments are also made
through Internet. The organizations, which provide these services, also use Internet.
These organizations use Internet to conduct electronic meetings, train employees in
many different locations simultaneously. The manufactures and corporate houses
directly deal with the producers without going through the retailers. A large
percentage of people are still not part of Internet. However, Internet users are
increasing rapidly.

Internet has facilitated development of workflow systems across networks. As we

have already discussed, workflow systems are business process automation tools that
place system controls in the hands of user departments. They are very flexible and
can be designed to automate almost any information-processing task. The primary
purpose of workflow systems is to provide users with tracking, routing, document
imaging, and other capabilities designed to improve business processes.

Teleconferencing, video conferencing and screen sharing are some of the other
Internet applications. Tele-video conferencing save travel time and travel cost. The
ideas can be shared quickly and the information flow is much faster. As a result, the
product development time and contract negotiation time have reduced. The customer
service has improved due to faster and accurate information availability. Many
organizations have been able to draw competitive advantage by using Internet.

The Internet connects hundreds of thousands of different networks from more than
200 countries around the world. More than 400 million people from academics,
business community and government organizations use the Internet. Uses of Internet
vary from being a communication medium to providing a means for collaboration
work.

The Internet is extremely robust. A system or a network can be added / deleted to

the Internet without adversely affecting others on the Internet. The communication
media used by Internet can be a telephone line, an Ethernet cable, or a microwave
link. The Internet can carry data, images, text, voice, or transactions without any
discrimination.

6
The Internet is being used by various organizations for collaborative work. These Networking Technologies
organizations use the Internet to send electronic mail, message, to transmit documents
and data. The organizations are organizing and participating in electronic
conferences.

Another popular use of Internet is to access information that others make available in
public domain. There are special software package known as search engines, which
help users locate the desired document. Large databases, electronic brochures, book
details, and manuals are present on the Internet. Organizations advertise their
products and services on the Internet.

Internet is also being used to participate in online discussions. These discussions are
done in real time. An applicant can be interviewed online from a distant location. The
candidate does not have to travel to appear for the interview. Apart from these
obvious uses, the Internet is inspiring new business models, called digital firms. In
digital firms, hierarchy and organizational levels are less compared to a traditional
firm. The employees at lower-levels have access to more data and have more
decision-making authority. The employees of an organization in a digital firm are not 9
to 5 people. They could be at location A and working for a digital firm at location B.
These firms are much leaner and efficient than traditional firms.

Internet has immensely helped the field workers. In a traditional environment, a field
worker had to go to his office to take orders for the day and report at the end of the
day again to provide details of his accomplishments. An employee of a digital firm
carries a laptop and enters the data into his laptop, which he transmits to his
organization using a dial-up connection. He can attend meetings without actually
traveling to his office.

The existing business processes have been thoroughly redesigned to take advantage
of IT. A loan application in a traditional system takes about 2 weeks to get processed.
A workflow system has reduced the time to less than a week. There is no paper
movement and everybody can work on an application in parallel.

A company can use global data along with its operational data to respond to changes
in the market place. A company works with much less inventory as it may easily co-
ordinate production activities in the light of the orders. The products can be
customized. The customization done to cater to the needs a very small segment is
referred to as micro marketing.

Internet has also been used for electronic commerce. In Electronic Commerce (EC),
business transactions take place via telecommunication networks. The business
transactions may take place between an organization and consumers or between two
businesses or organizations. The major benefits to the company include reduced cost,
reduced cycle time, and improved customer service. Following is a list of benefits to
an organization using electronic commerce.
• EC decreases the cost of creating, processing, distributing, storing, and reliving
information.
• EC allows reduced inventories and overheads.
• EC reduces the time between the payments and receipts of goods and services.
EC enables an organization to operate in the areas much beyond their physical
location.

E-commerce is the process of buying and selling goods and services electronically
using Internet. The activities such as marketing, advertising, customer support,
delivery, and payments are also done electronically. An e-business is supported by
Internet within the organization. 7
Information Technology One must keep in mind that e-commerce is a whole new business paradigm which
for Managers needs fresh thinking. Just creating a web site doesn’t guarantee success. Many
people started e-business and failed. A sound e-business model is required. Some of
the Internet business models are as follow:

Virtual storefront is an e-business where physical goods or services are sold online
instead of an actual retail outlet. An example is www.amazon.com, which sells book
and other items online. A customer can select an item from their web site and place
an electronic order. He can make payment through credit card and then the company
delivers goods to him using traditional means. There are e-businesses whose prime
business is to sell items where prices are not fixed. The prices are decided by the
customers through auction. There are e-businesses who are content provider and
manager. The companies where core competence is not IT, hire an IT company to
create web sites and databases for them. Some companies provide portals to other
organizations. A portal is a web site that provides an initial entry point to the web site
of the company or other services e.g. Yahoo is a portal.

The e-commerce can also be classified based on the parties involved in the business.
A business-to-consumer e-business involves an electronic retail home and customers.
Such a business is also called B2C business, www.amazon.com is an example of
B2C business. Business-to-business (B2B) involves transaction among businesses.
The main advantage is that a business house can buy raw material and supplies from
another business party without going through the retailer. www.Milpro.com/ is an e-
business, which sells machine tools to other businesses. In a consumer-to-consumer
business (C2C), the e-business is a facilitator only. People are able to sell to other
people using a C2C facility.

1.7 COMPUTER AIDED DECISION MAKING

A decision system supports and assists all aspects of problem specific decision-
making.

A decision support system (DSS), also called Computer Aided Decision System
(CADS), is used when the problem is complex and the information needed to make
the best decision is difficult to obtain and use.

In an organization, a manager has certain goals, which he tries to achieve through the
use of resources. The resources such as people, money, material, and time is always
limited. One of the roles that a manager plays among many others is of decision-
making. The manager would like to examine various alternatives, which may not be
possible in a manual system due to time constraint or due to sheer volume of data.
Sometimes, a statistical analysis of fluctuating data is required which may be done
only with the help of a decision support system. The data may be distributed over
various branches of the organization and without the help of Information Technology;
it may not be possible to examine the data.

An information system that helps a manager in making a decision is called a

computer-aided decision support system (CADS) or simply decision support system
(DSS). A DSS is designed with the help of decision makers. A DSS aids in decision-
making process and does not make any decision. A DSS may be used for doing a
thorough risk analysis of a project. Such a DSS performs what - if analysis. A DSS
consists of a model of the real world, collection of facts- database, and a user
interface.

8
An analyst talks to the manager and tries to establish his requirement. Analyst may Networking Technologies
need to interact with users many times before the requirements are completely
understood. The analyst may also study the existing system if any. The analyst must
have domain knowledge. The reality is examined, the problem is identified, and it is
defined. The problem may be too complex to be analyzed. In such a situation, a
simplified version of the problem is defined. The simplified problem is used to create
a model of the actual problem. There are many ways of creating a model for a
problem. The model may be a scale model, i.e. model of a building or a bridge. It may
be a mathematical model such as equations describing the trajectory of a missile. The
model may be an analog model such as a blue print for a building or a map to show a
particular region. There are many other types of models, which are not discussed
here. A model has a set of uncontrollable variables that are not under the control of
the manager. There is a set of decision variables, which are under the control of the
manager, and these variables describe alternative course of action. As the values
assigned to decision variables are changed, the results also change. The result
variables are dependent on decision variables.

The analyst then documents the requirements using one of the formal representations
such as Data Flow Diagram, Flowcharts, ER diagram, structured English. Such a
document is called Software Requirements Specification (SRS).

A system is then built according to the requirements. There are many software
development models such as waterfall model, prototype, and incremental models. For
a decision support system, usually a prototype is built which is shown to the manager
for approval. The complete system is then built taking the feedback from the
manager into consideration.

The decision variables are changed and impact on result variables is analyzed. A DSS
provides support for decision makers by bringing together human judgment and
computerized information. A DSS may provide support throughout large and complex
organization or it may support an executive. A DSS may help an executive to perform
trend analysis. A DSS may be designed to generate exception report so that the
manager does not miss any exceptional condition.

1.8 SUMMARY

In this unit, we have learnt about the Information Systems. The terms Information
Systems and Information Technology are used synonymously. We learnt a few
definitions of IT. We also learnt the main components of an IT system. We also learnt
various types of IT systems that are used in a business. The business applications of
IT were discussed in some detail. Internet and E-commerce which is one of the
applications of Internet were discussed. Various business models of e-business were
also discussed. IT has also been used extensively in decision-making systems. These
systems do not make any decisions by themselves but they only help the decision
maker in analyzing the data.

9
Information Technology
for Managers 1.9 UNIT END EXERCISES

1. Define an information system and list its major components.

2. Describe how information system can support a business.
3. Define the Internet, Intranet, and e-commerce.
4. Briefly describe various types of Information Systems.
5. What is the purpose of a TPS? How does it compliment MIS in an organization?
6. List the major advantages of the Internet. Briefly describe impact of Internet on
business.
7. Write a note on e-commerce. What are the advantages of e-commerce over
conventional business?
8. What is the purpose of a computer aided decision support system? What are the
major components of such a system? How does it help the decision making
process?

1.10 REFERENCES AND SUGGESTED FURTHER

READINGS

Lauden, K. C. and Lauden, J. P., (2002) Management Information Systems-

Managing the Digital Firm, Pearson Education.

Turban, E., McLean, E. and Wetherbee, J., (1999), Information Technology for
Management, John Wiley, and Sons Inc. (Asia).

10
Networking Technologies
UNIT 2 COMPUTER SYSTEMS
Structure
2.1 Introduction
2.2 Objectives
2.3 Components of a Computer
2.4 Central Processing Unit (CPU)
2.5 Storage and Storage Devices
2.6 I/O Devices
2.7 Networking and Networking Devices
2.8 Plug and Play Devices
2.9 Communication Technology
2.10 Types of Computers
2.11 Summary
2.12 Unit End Exercises
2.13 References and Suggested Further Readings

2.1 INTRODUCTION
For an information system, hardware is defined as any machinery that helps in input,
processing, storage, and output activities. Similarly for a computer, the hardware is
the collection of devices that perform the functions of input, processing, data storage,
and output. In other words, all physical units of a computer system constitute
computer hardware. The input device gets the data from the outside world and the
data is stored in the memory. The central processing unit (CPU) processes this data
and the various output devices display the results. The components communicate with
each other through system bus. Each hardware component plays an important role in
computing. The arrangement of the component within the system even today is what
was suggested in 1945 by Von Neumann and is known as Von Neumann architecture.

2.2 OBJECTIVES
After reading this unit you should be able to:
• Identify the components of a computer system;
• Describe the elements of a CPU;
• Explain the concept of networking; and
• Use plug and play devices

2.3 COMPONENTS OF A COMPUTER

Input Output
Devices Devices
Control Arithmetic
Unit and Logic
Unit

Primary Storage

Communication
Secondary Storage Devices

Fig. 2.1 : Components of a Computer 1

Information Technology The computer memory is categorized into primary storage and secondary storage.
for Managers Primary storage stores the data and programs during processing and secondary
storage is used to store the data and programs for future use. Communication
devices connect a computer to other computers and devices to facilitate data
exchange with them.

Computers have been around since 1940s and have been evolving ever since.
Computer hardware has evolved through four stages.

The so-called first generation (1946-1956) computer was built by vacuum tubes and
programming was done by plugging and unplugging chords. The second-generation
(1957-1963) computers had transistors. The third generation (1964-1979) computers
had integrated circuits. The fourth generation (1979 onwards) systems use very
large-scale integrated circuits. Along with the hardware technology, the software also
improved in terms of being user friendly and capability. Every system has software
as its integral part, which makes the computer work. The most important software is
an operating system (OS), which performs two functions:
• Extend the machine - OS presents to the user an extended machine that is easier
to program than the underlying hardware.
• Manage resources such as processor(s), memories, timers, disks, mouse,
network, printer etc. OS provides an orderly and controlled allocation of the
resources among the various programs competing for them.

2.4 CENTRAL PROCESSING UNIT (CPU)

In order to work, a computer needs some sort of “brain”. At the core of each
computer, there is a device called central processing unit (CPU), which is the brain
of the computer. CPU reads the program from the main memory, and executes each
step of the program, which may involve calculations and decision-making. The CPU
is responsible for controlling all devices of the computer. It initiates a memory
operation, which may involve reading data from an input device and storing it into
memory or read data from the memory and display it on an output device.

The CPU mainly consists of three parts— Control Unit, Arithmetic Logic Unit
(ALU), and Primary Storage (also referred to as Main Memory).

The ALU is the unit, which performs all mathematical calculations and logical
operations. It performs addition, subtraction, multiplication, and division. It performs a
logical operation by comparing two numbers. It can determine the smaller number,
larger number or determine if the two numbers are equal. It can also determine
whether a number is positive, negative or zero.

A program is a sequence of instructions. An instruction may be an arithmetic

operation, a logical operation, an assignment, or a jump. The control unit sequentially
accesses program instructions, decodes them, and directs ALU, Main Memory, input
devices, and output devices so that the program instructions can be carried out.
Execution of one program instruction may require control unit to issue many
directives. The ALU may also perform many operations to complete one program
instruction. Each operation performed by ALU and control unit is referred to as
machine instruction. Each program instruction may involve many machine
instructions. A single machine instruction is completed in a machine cycle. The
number of machine instructions completed in a second is called the speed of the
CPU and it is measured in MIPS (Millions of instructions per second). A CPU also
contains a set of registers, which are specialized, small, high-speed memory for
storing temporary results of ALU and for storing control information.
2
Computer Speed Networking Technologies

The word length of a CPU is the number of bits it can process in a single cycle. A
64-bit machine can process 64 bits in a single cycle. A 64-bit machine is faster than a
32-bit machine.

The cycle is defined by the internal clock of the control unit. The Pentium based
systems have a clock speed of 1GHz or more whereas 3 years ago the speed used to
be 300 MHz. The bus carries data, control signals, and address in a system. If the
data bus width is same as the word length, then one word can be moved at a time. If
the bus width is half of word length, two cycles are required for moving one word.

The instruction set also affects the speed. If the instruction set is simple, as in RISC,
one or more instructions may get executed in each cycle. There will be some long
instructions, which take more than one cycle. It is possible that a given application
extensively uses long instructions (such as scientific computing) and the machine will
appear to be slow.

There is no direct relationship between clock frequency and the speed of a system.
There are benchmark programs that are run to establish the speed of a computer
system.

2.5 STORAGE AND STORAGE DEVICES

The large amount of data is stored on a computer using various types of storage
media. The storage media are distinguished by their relative speed, capacity, and
resilience to failure.

1) Volatile Storage: Information residing in such storage needs continuous power

supply. The contents are lost if power supply is switched off. Examples of such
storage devices are main memory and cache memory, which we will discuss in
the next section. Access to volatile storage is very fast, both because of the
technology used and because of the access method.

2) Nonvolatile Storage: The nonvolatile storage media do not require power supply
to retain their contents. Examples of such storage media are disks and magnetic
tapes. Disk is used for online storage, while tapes are used for archival storage.
Disks and magnetic tapes are very reliable storage media. The current
technology used for nonvolatile storage makes them much slower than volatile
storage.

Main Memory

Main memory holds the programs and data required by the CPU for carrying out its
operations. The primary storage is a semiconductor device that is built using
integrated circuits. The data is stored in binary form by main memory. Numeric as
well as non-numeric data can be represented in binary form. With two binary digits,
we can represent 4 different characters. With three binary digits, we can represent 8
different characters. Computes internally use eight binary digits to represent
characters and digits (A binary digit is referred to as bit and 8 bits are called a byte).
256 characters can be represented by a byte. The main memory consists of many
thousands of bytes. The table given below lists commonly used names, abbreviations
and the number of bytes for storage capacity.

3
Information Technology Table 2.1: Commonly Used Names and Abbreviations for Storage Capacity
for Managers
Name Abbreviation Number of Bytes

Byte B 1

Kilobyte KB 1,024

Megabyte MB 1,024 * 1,024 (about one million)

Gigabyte GB 1,024 * 1,024 * 1,024

Terabyte TB 1,024 * 1,024 * 1,024 * 1,024

Types of Main Memory

Memory can be of various types like Random Access Memory (RAM) and Read-Only
Memory (ROM). The figure 2.2 given below gives a description of the memory types.

MEMORY
TYPES

Random Read
Access Only
Memory Memory
(RAM) (ROM)

SDRAM DRAM EPROM PROM

Fig. 2.2: Types of Memory

RAM has become the synonym for main memory. 20 years ago, the word core
memory was used for referring to main memory. RAM is the memory access method
and core memory was the technology used in main memory. The core memory
technology is not used any more. RAM is an acronym for random access memory.
As the name suggests, any location of the memory can be accessed randomly and
the access time to is independent of the location. We will continue to use word RAM
to refer to main memory. RAM is very fast; the access time is in nano seconds.
RAM is volatile that is the contents of RAM are lost when the power supply to the
RAM is discontinued.

DRAM (Dynamic Random Access Memory) is the most common kind of RAM. The
data is stored in the cell of transistors and capacitors and the data has to be refreshed
every few milliseconds. SRAM (Static Random Access Memory) does not require
periodical refresh. SRAM is faster than DRAM but is more expensive as compared
to DRAM.
4
A part of computer storage is ROM that cannot be erased or changed. ROM is an Networking Technologies
acronym for read only memory. ROM is nonvolatile i.e. its contents are not lost when
power is switched off. ROM is required for storing the boot program that should not
be lost or changed due to any failure. ROM also comes in many flavors such as
PROM and EPROM. PROM (Programmable Read Only Memory) is used for
storing some specialized application by the computer designers instead of chip
designers. PROM can be written only once. EPROM (Erasable Programmable Read
Only Memory) can be erased and reprogrammed many times.
Secondary Memory
Main Memory provides a small amount of volatile storage. But a computer needs to
store large amount of data and instructions permanently. The secondary memory is
non-volatile and has large capacity. The secondary memory is slow as compared to
main memory. Various technologies are used for secondary memory, some provide
random access, and others provide sequential access. In sequential access, data must
be accessed in the order in which it is stored. For example, if we have stored data of
students in the order of their roll numbers, then to retrieve data of student with roll
number 20, we need to read (and possibly discard) the data of students with roll
numbers 01 to 19 before we can access the desired data. If direct access is provided
then any part of the data can be accessed directly, without the need to pass by other
data in sequence. The sequential access storage devices are referred to as SASD
(Sequential Access Storage Devices) and the direct access devices are called
DASDs (Direct Access Storage Devices). The most common forms of secondary
storage devices are magnetic tapes and magnetic disks.

Magnetic tape is one of the common sequential secondary storage mediums. The
tape usually is a Mylar film coated with iron oxide. Portions of the tape are
magnetized to represent bits. It is sequential access device, to access the nth block on
tape; we must first read the preceding n-1 blocks. The main advantages of the
magnetic disks are they are inexpensive, long lasting and can store large volume of
data (20 GB to 150 GB). Generally it is used for back up or archival storage of data.

Magnetic Disk is all made of magnetic material shaped as a thin circular disk and
protected by a plastic or acrylic cover. A disk is single sided if it stores information on
only one of its surfaces and double sided if both surfaces are used. To increase
storage capacity, disks are assembled into a disk pack, which may include as may as
30 surfaces. Information is stored on the disk surface in concentric circles of small
width, each having a distinct diameter. Each circle is called a track. For disk packs,
the tracks with the same diameter on the various surfaces are called a cylinder. The
concept of cylinder is very important because data stored on the same cylinder can
be retrieved much faster than if it were distributed among different cylinders.

Each concentric circle typically stores the same amount of data. The number of
tracks on a disk ranges up to 800. Capacity of each track typically ranges from 4-50
Kbytes. Each track is divided into sectors. The division of a track into equal sized
blocks or pages is set by the operating system during disk formatting. There is a read/
write head, which reads data from the disk and writes data to the disk. A disk is
mounted on the disk drive, which has the motor that rotates it. A read/write head has
a mechanical arm attached to it. All arms are connected to an actuator attached to
another electrical motor, which moves the head in unison and positions it over the
cylinder of tracks specified in a block address.

RAID (Redundant Array of Independent Disks) is an array of multiple inexpensive

hard disks that provides fault tolerance through redundancy and improved access
rates. It provides a method of accessing multiple individual disks, as they are one
large disk. The data is spread over these multiple disks, thereby reducing the risk of
losing all data if one disk fails. Usually, RAID is used in a computer, which is a file
5
Information Technology server or a transaction server, where data accessibility is critical and fault tolerance is
for Managers required. Nowadays, RAID is also being used in desktop systems for CAD,
multimedia editing, and playback where higher transfer rates are needed. The RAID
has following levels:
1) RAID 0: It is also known as “Disk Striping”. This is technically not a RAID
level since it provides no fault tolerance. Data is written in blocks across multiple
drives for fast access. The advantages of striping are the higher access rate, and
full utilization of the array capacity. The disadvantage is there is no fault
tolerance
2) RAID 1: This is also known as “Disk Mirroring”. Raid 1 provides redundancy by
writing the data twice. If one disk fails, the other contains an exact duplicate of
the data and the RAID can switch to using the mirror drive with no lapse in user
accessibility. The disadvantages of mirroring are no improvement in data access
speed, and higher cost, since twice the number of drives is required. However, it
provides the best protection of data since the array management software will
simply direct all application requests to the surviving disk members when a
member of disk fails.
3) RAID 3: RAID level 3 distribute data across multiple discs and stores additional
information on one disc for error correction in recovery. It has high reliability and
it is fast.
4) RAID 5: It is the most popular configuration. In RAID 5, the additional data,
which is used for error detection and correction, is also distributed over many
discs. This arrangement has very high reliability and access speed is also good.
However, the write operation is slower compared to other RAID configurations.
Optical Disks are the disks made of plastic, in which lasers that physically burn pits in
the disk record data. Here each pit represents a binary digit 1 and each unpitted area
represents binary digit 0. Optical discs are direct access devices. The advantage of
optical disks are that the amount of physical disk space needed to record an optical
bit is much smaller than usually required by magnetic media and is less susceptible to
deterioration.
Cache
It is high-speed memory. The CPU keeps part of the program and the data into cache
memory, which it is likely to use frequently. Typically the cache memory is limited to
256 KB or higher. Cache plays a direct role in increasing Internet speed than RAM
does. RAM and cache are both a form of computer memory. Cache stores images
and text from web pages as you view them. Pages in cache are not updated while
RAM refreshes it again and again.
Activity A
1) Computer’s motherboard, processor, and CPU are the same or different things?
.......................................................................................................................

.......................................................................................................................

.......................................................................................................................
6
2) What’s the difference between cache and RAM? Networking Technologies

.......................................................................................................................

2.6 INPUT/ OUTPUT DEVICES

They are used as a medium of communication between the external environment and
the CPU. The input is provided to the computer through the input devices and the
output is given through the output devices. The input and output devices are
controlled by the CPU. A computer system may also have devices under the control
of CPU dedicated for controlling the input output devices.
Input Devices
Table 2.2 give below highlights the categories into which the input devices fall.
Table 2.2: Categories of Input devices

Voice Recognition devices are used to recognize human speech. It converts human
voice signals received through microphone to digital signals using software tools.
Voice recognition systems are becoming popular.

Bar Code Reader scans the code (black and white bars), which specifies the name of
the product and its manufacturer. The computer then finds the price of the product
from the database. It is used for high- volume processing of data where use of
keyboard entry can be very time consuming, for example they are used in
supermarkets.

Digital cameras are used to capture pictures. The pictures are digitized and stored in
computers. The pictures can be reviewed, deleted, edited, and saved for future use. 7
Information Technology Images can be transmitted from a PC to a printer or to other cameras. They can be
for Managers mailed to friends. Digitizers are devices that convert drawings made on sensitized
surface with the help of pen to machine-readable input. These inputs are transferred
to the computer. A smart card is a card that is embedded with either a
microprocessor and a memory chip or only a memory chip with non-programmable
logic. The microprocessor card can add, delete, and otherwise manipulate information
on the card, while a memory-chip card (for example, pre-paid phone cards) can only
undertake a pre-defined operation.
Output Devices
The output generated by a computer can be transmitted to the user via several
devices and media. These devices are called output devices. Following are some
important output devices:
1) Monitors: It is a video screen that displays both input and output data. It comes
in different sizes ranging from few inches to several feet. It is interactive in
nature, which is the main advantage associated with this device. It consists of
CRT (Cathode Ray tube) technology. It is the electronic “gun” that shoots the
beam of electrons and illuminates the pixels on the screen.
2) Printers: There are two broad categories of printers i.e. Impact and Non Impact
Printers. Impact printer uses striking action to press a carbon against paper to
create a character. Dot matrix, Line, and Daisy wheel are some important type
of Impact printers. They are slow and noisy. They don’t support graphics and are
susceptible to mechanical breakdowns.
Non Impact Printers use laser beams to write information on photosensitive
drums. The paper passes over the drum and picks the image with toner. Laser
Printer is the example of Non Impact Printers. They have high speed and can
produce print- quality text and graphics. Ink-jet printers are Non Impact Printers,
which shoot tiny dots of ink on the paper. They are inexpensive and are used for
low volume graphical applications when different colors of ink are required.

3) Plotter: They use computer driven pens for creating black and white or color
graphic images likes charts, graphs etc. They are used in engineering and
architectural drawings.

2.7 NETWORKING AND NETWORKING DEVICES

A network is a group of computers, printers, and other devices that are connected
together with cables. Data travels over the cables, allowing network users to
exchange documents and data with each other. Many users can use the same printer
and share hardware and software that are connected to the network. Each computer,
printer, or other peripheral device that is connected to the network is called a node. A
network can have tens, thousands, or even millions of nodes.

The number of possible ways to logically arrange the nodes, or computer systems and
devices on the networks are mainly of five types. They are termed as network
topologies, i.e. the logical model that describes the network structure or configuration.
These types are bus, ring, hierarchical, star and hybrid.

The computers in the ring network are connected in ring or circle. There is no central
computer and messages are routed around the ring from one device to another in one
direction. In the bus network the devices are connected on the single line. Each
device is connected to the single bus and can directly communicate with all other
devices on the network. A star network has a central computer. This central
computer controls and directs messages. If the central computer breaks down, entire
8
system is broken down. The hierarchical structure has tree like structure and does
not have a central computer. Messages pass through all the branches of the tree till Networking Technologies
they reach the destination. This structure is easy to repair as any branch can be
isolated and repaired without affecting any other branch. Hybrid network is the
combination of two or more topologies.

Ring Structure
Hybrid Structured
Star Structure

Tree Structure Bus Structure

Fig. 2.3: Types of Network Topologies

Network Devices
Network devices allow multiple computers to exchange data and information through
Internet or Intranet connection. Many people can use a single printer, or share other
devices and resources on the network. Every network has a router which is a device
that connects two or more networks and determines the next point to which a
‘packet’ of data should be forwarded towards its destination. A packet is the smallest
unit of data that travels on the network. A hub is the center point where several
network connections converge i.e. it the point where data comes in from one or more
directions and is forwarded to one or more directions. Sometimes the same device
serves as both the hub and router. NIC (Network Interface Card) is a card installed
on a computer that connects the computer to the network. It provides dedicated and
full-time connection to the computer.

2.8 PLUG AND PLAY DEVICES

Plug and Play (also called PnP) specification was developed by Microsoft with
cooperation from Intel and many other hardware manufacturers. The goal of Plug
and Play is to create a computer whose hardware and software work together to
automatically configure devices and assign resources, to allow for hardware changes
and additions without the need for large-scale resource assignment tweaking. As the
name suggests, the goal is to be able to just plug in a new device and immediately be
able to use it, without complicated setup maneuvers.

The plug and play feature was introduced in Windows 2000. One can plug in, for
instance, an USB device and it is detected and accepted by the system so that the
device can be used without rebooting the system. Operating system has drivers for
most of the devices. When a device, for which operating system has the driver, is
plugged in, the communication between the driver and the device is established
9
by the OS.
Information Technology These devices are connected to the computer in several ways. Some devices, such
for Managers as network adapters and sound cards, are connected to expansion slots inside the
computer. Other devices, such as printers and scanners, are connected to ports
outside the computer. Some devices, known as PC Cards, connect only to PC Card
slots on a portable computer. The operation system must have device drivers for all
plug and play devices.

USB (Universal Serial Bus) is the new industry standard for attaching peripheral
devices to the computer. This technology is designed for use with numerous devices,
including printers, digital cameras, game pads, joysticks, keyboards and mice, and
storage devices. USB hardware is identical across platforms. It replaces all the
different kinds of serial and parallel port connectors with one standardized plug and
port combination. The devices can plug in without opening the PC.

Fig. 2.4: Universal Serial Bus (USB)

There are two types of USB connectors

1) The Type A connector (below) is used to connect a USB device to a hub or

CPU and is sometimes referred to as a “downstream” connector (The CPU is
always in the “upstream” direction). It is rectangular in shape and is friction fit
into a Type A plug. Type A plugs exist in the CPU and keyboard.

2) The Type B connector (below) is used to attach a USB cable to an endpoint

device such as a camera, scanner, or mouse and is sometimes referred to as an
“upstream” connector. It is easily identified by its “house” shape (square with a
V-shaped “roof”).

Fig. 2.5: Types of Universal Serial Bus (USB) connectors

Activity B
What were the main reasons for the change from the serial, printer, game, and
ps/2 ports to the USB 1.1 port?
.............................................................................................................................

.............................................................................................................................

.............................................................................................................................
10
Networking Technologies
2.9 COMMUNICATION TECHNOLOGY
Communications is the transmission of a signal by a way of particular medium from a
sender to a receiver. For example in human speech, the sender transmits a signal
through the transmission medium air.

Signal
Sender Receiver

Transmission
Medium

For the effective communication both the sender and the receiver should understand
the signals and have common interpretation for them. When communication has to be
established a medium is required for transmission. This pathway/medium is called as
communication media. It includes twisted pair, coaxial cable, fiber optic cable,
microwave transmission, and satellite transmission. The table 2.3 lists main
characteristics of these mediums.

Table 2.3: Main characteristics of mediums

Medium Advantages Disadvantages

• Inexpensive • Low Bandwidth

Twisted Pair • Widely available • Low security (easily tapped)
• Easy to work with • Emits electromagnetic
interference

• Higher Bandwidth • Expensive and Inflexible

Coaxial Cable • Less susceptible to • Easily tapped
electromagnetic interference.

• High Bandwidth • Expensive

Fiber Optic Cable • Difficult to tap • Difficult to splice
• Lighter than coaxial cable • Inflexible

Microwave • Very High Bandwidth • Uses Encryption for security

• Relatively Inexpensive

• Very High Bandwidth • Expensive

Satellite • Large coverage • Signals experience
propagation delay.
• Uses Encryption for security

There are two modes of communication – Synchronous and Asynchronous. In

Synchronous transmission, data bits are sent over a communication link and the data
transfer is controlled by a timing signal initiated by the sending device. Each data
block is preceded by unique characters called sync bits. The receiving device
synchronizes itself with a stream of these bits. Synchronous transmission is generally
used for transmitting large volume of data at high speed. For Asynchronous
transmission, one character is transmitted or received at a time.

11
Information Technology Each character is preceded by start bit and ended with end bit, so that the receiving
for Managers device knows where the character begins and ends. It is inefficient due to the
overhead of transmitting start and stop bits. It is generally used for low speed data
transmission.

Data transmission occurs in one of the following three directions: Simplex, half
duplex, or full duplex. In simplex data transmission, the data transmission takes place
in only one direction. Public announcement systems such as radio and television use
simplex mode of data transmission. It is simple and relatively inexpensive. In half-
duplex transmission mode, the transmission takes place in both directions but only in
one direction at a time. Full duplex mode of transmission allows transmission in both
directions simultaneously. For example, on telephone both parties can communicate
simultaneously. The cost of full duplex transmission is high as compared to both
simplex and half duplex.

2.10 TYPES OF COMPUTERS

Mainframes: Mainframes are not as powerful and not as expensive as super

computers. A large organization generally uses a mainframe as a contact database
and file server.

Minicomputers: There are also called midrange computers. There are less powerful
than mainframes. Minicomputers are used for specific tasks such as scientific
research and engineering applications. Some times, large organizations install many
minicomputers instead of one mainframe. The application, and data are distributed
ones minicomputer to achieve better reliability. Small organizations use a
minicomputer as a server.

Workstations: A workstation is usually based RISC architecture, provides high

solution graphic displays and high-speed calculations. Scientific and business
community uses these machines.

Microcomputer: Microcomputers, also called personal computers, are general-

purpose computers. A PC that sits on a desk is called desktop personal computer in
contrast to a laptop computer, which is portable.

Network Computer: A network computer (NC) is a desktop terminal that is

connected to a central computer. A NC has essentially no storage, no CPU, and no
secondary storage. It has a keyboard and a video display. It uses processing power
and storage of its central processor.

2.11 SUMMARY

In this unit, we have discussed an introduction to computer systems. The components

of computer, which we explained in detail include: CPU, ALU, storage, and I/O
devices. The CPU works as the brain of the system, while RAM is the working
memory of the system. Today’s computers come with possibilities to use many plug
and play devices, and they are also network compatible. We have also discussed the
concepts related to networking in this unit, where we have described the various
media used such as co-axial cable, satellite, fiber optics, and microwave
communication. At the end, we have given a brief overview of different types of
computers though generatiaons.

12
Networking Technologies
2.12 UNIT END EXERCISES

1) What are the components of a computer system?

2) What are the components of a CPU?
3) What factors affects the speed of a computer?
4) Write a detailed note on primary memory.
5) Write a detailed note on secondary memory.
6) Write a detailed note on Input-Output devices.
7) What are plug-and-play devices?
8) What are various types of computer?

2.13 REFERENCES AND SUGGESTED FURTHER

READINGS

Fitzherald, J.and Dennnis A, Business Data Communications and Networking;

John Wiley & Cons. Inc.

Laudon C K & Laudon J P, Management Information Systems, Pearson Education,

Asia.

Turban, T., Ephraim, M. and Wetherbe J., Information Technology for

Management, John Wiley and Sons, Inc., 1998.

13
Networking Technologies
UNIT 3 COMPUTER SOFTWARE
Structure
3.1 Introduction
3.2 Objectives
3.3 System Software
3.3.1 Operating Systems
3.3.2 Language Translators
3.3.3 Utility Programs
3.4 Application Software
3.4.1 Programming Languages
3.5 Open Source Software
3.6 Acquiring Application Software
3.7 Summary
3.8 Unit End Exercises
3.9 References and Suggested Further Readings

3.1 INTRODUCTION

The word software collectively refers to various kinds of programs used to operate
computers and related devices. A program is a sequence of instructions that a
computer can interpret and execute. Programs can be built into the hardware itself,
or they may exist independently in a form known as software. Hardware describes
the physical components of computers and related devices.

Software may be distributed on floppy disks, CD-ROMs, and on the Internet. It is

usually stored on an external long-term memory device, such as a hard drive or
magnetic diskette. When the program is in use, the computer reads it from the
storage device and temporarily places the instructions in random access memory
(RAM). The process of fetching and then performing the instructions is called
“running,” or “executing,” a program. Software programs and procedures that are
permanently stored in a computer’s read-only memory (ROM) are called firmware.

The two main types of software are system software and application software.
Application software consists of programs that are aimed to help users in solving
particular computing problems. Microsoft Internet Explorer for web browsing, Adobe
Photoshop for developing computer graphics, Yahoo Messenger for instant messaging
all lies in the application software category. The other class of software is the system
software, which encompasses the programs that heavily interact with computer
resources and provide services to other programs. Popular examples in this are
Operating Systems (OS), hardware drivers, compiler etc.

3.2 OBJECTIVES
After reading this unit, you should be able to:
• Describe about the different types of operating systems and their functions;
• State the characteristics of system software and application software;
• Differentiate between compiler and interpreters;
• Enumerate the advantages and disadvantages of compilers and interpreters;
• Define and explain the concepts and philosophy of open-source software; and
• Explain the process of software acquisition. 1
Information Technology
3.3 SYSTEM SOFTWARE
for Managers

System software co-ordinates the various parts of computer system and mediates
between the application software and computer hardware. Operating system is
system software, which manages and controls the computers activities. The other
system software consists of computer language translation programs that convert
programming languages into machine language and utility programs that perform
common processing tasks.

3.3.1 Operating Systems

An operating system is a set of computer programs that controls the computer
hardware and acts as an interface with the application programs. The operating
system plays a central role in the functioning of a computer system. It is usually
stored on disk, after the computer system is started or booted up portions of operating
system are transferred to memory as required. The kernel as the name suggests is
the heart of the operating system and controls the most critical processes. Windows
by Microsoft, Linux, UNIX, and the Macintosh are the commonly used operating
systems.

In some specialized or embedded computers the operating instructions are contained

in their circuitry; common examples are the microcomputers found in calculators,
automobile engines, mobile phones and microwave ovens.
Functions of Operating System
An operating system performs allocation and assignment of system resources,
schedules the use of computer resources, monitors the computer system activities
etc. The various activities performed by a typical operating system are:
• Performing common computer hardware functions.
• Providing a user interface
• Providing a degree of hardware independence
• Managing system memory
• Managing processing tasks
• Providing networking capability
• Controlling access to system resources
• Managing files
Common Hardware Functions
All application programs must perform certain tasks. For example
• Getting input from the keyboard or some other input devices
• Retrieving data from disks
• Storing data on disks
• Displaying information on a monitor or printer
Each of these basic functions requires a more detailed set of instructions to complete.
The operating system converts a simple, basic instruction into the set of detailed
instructions required by the hardware. In effect, the operating system acts as
intermediary between the application program and the hardware. The typical OS
performs hundreds of such functions, each of which is translated into one or more
instructions for the hardware. The OS notifies the user if input/output devices need
attention, if an error has occurred, or if anything abnormal has happened in the
2
system.
User Interface Networking Technologies

One of the most important functions of any operating system is providing a user
interface. A user interface allows individuals to access and command the computer
system. The first user interfaces for mainframe and personal computer systems were
command based. A command-based user interface requires that text commands be
given to the computer to perform basic activities. For example, the command ERASE
00TAXRTN would cause the computer to erase or delete a file called 00TAXRTN.
RENAME and COPY are other examples of commands used to rename files and
copy files from one location to another. Many mainframe computers use a command-
based user interface. In some cases, a specific job control language (JCL) is used to
control how jobs or tasks are to be run on the computer system.

A graphical user interface (GUI) uses pictures (called icons) and menus displayed on
screen to send commands to the computer system. Many people find that GUIs are
easier to use because user intuitively grasp the functions. Today, the most widely
used graphical user interface is Windows by Microsoft. Alan Kay and others at
Xerox PARC (Palo Alto Research Center, located in California) were pioneers in
investigating the use of overlapping windows and icons as an interface. As the name
suggests, Windows is based on the use of a window, or a portion of the display screen
dedicated to a specific application. The screen can display several windows at once.
The use of GUIs has contributed greatly to the increased use of computers because
users no longer need to know command-line syntax to accomplish tasks.

Hardware Independence

The applications make use of the operating system by making requests for services
through a defined application program interface (API). Programmers can use APIs
to create application software without having to understand the inner workings of the
operating system.

Suppose a computer manufacturer designs new hardware that can operate much
faster than before. If the same operating system for which an application was
developed can run on the new hardware, minimal (or no) changes are needed to the
application to enable it to run on the new hardware. If APIs did not exist, the
application software developers might have to completely rewrite the application
program to take advantage of the new, faster hardware.

Memory Management

The purpose of memory management is to control how memory is accessed and to

maximize available memory and storage. The memory management feature of many
operating systems allows the computer to execute program instructions effectively
and with speed.

Memory controller allows the computer system to efficiently and effectively store
and retrieve data and instructions and to supply them to the CPU. Memory
management programs convert a user’s request for data or instructions (called a
logical view of the data) to a physical location where the data or instructions are
stored. A computer understands only the physical view of data –that is, the specific
location of the data in storage or memory and the techniques needed to access it.
Memory controller converts a logical address to a physical address.

Memory management is important because memory can be divided into different

segments or areas. Some computer chips provide “rings” of protection. An operating
system can use one or more of these rings to make sure the application programs do
not penetrate an area of memory and disrupt the functioning of the operating system,
which could cause the computer system to crash. Memory management features of
3
Information Technology
today’s operating system are needed to make sure that application programs can get
for Managers
the most from available memory without interfering with other important functions of
the operating system or with other application programs.

Most operating systems support virtual memory, which allocates space on the hard
disk to supplement the immediate, functional memory capacity of RAM. Virtual
Memory works by swapping programs or parts of programs between memory and
one or more disk drives using a concept call paging. This reduces CPU idle time and
increases the number of jobs that can run in a given time span.

Processing Task

Managing all processing activities is accomplished by the task management features

of operating systems. Task management allocates computer resources to make the
best use of system assets. Task management software may permit one user to run
several programs or tasks at the same time (multitasking) and allow several users to
use the same computer at the same time (time-sharing).

An operating system with multitasking capabilities allows a user to run more that one
application at the same time. Without exiting a program, user may start another
application and switch to newly started application, and then jump back to the first
program, picking up where it was left off. Better still, while user is working in the
foreground on one program, one or more other applications can be churning away,
unseen, in the background, sorting a database, printing a document, or performing
other lengthy operations. In the absence of starting background processes, a
foreground process would monopolize the computer and if the process happens to be
non-interactive such as a file print, then the user will just have to sit and stare at the
screen till the process completed. Multitasking can save users a considerable amount
of time and effort.

Time-sharing allows more than one person to use a computer system at the same
time. For example, 15 customer service representatives may be entering sales data
into a computer system for a mail-order company at the same time. In another case,
thousands of people may be simultaneously using an on-line computer service to get
stock quotes and valuable business news.

Time-sharing works by dividing time into small CPU processing time slices, which
can be a few milliseconds or less in duration. During a time slice, some tasks for the
first user are done. The computer then goes from that user to the next. During the
next time slice, some tasks for the next user are completed. This process continues
through each user and cycles back to the first user. Because the CPU processing
time slices are small, it appears that all jobs or tasks for all users are being completed
at the same time. In reality, each user is sharing the time of the computer with other
users.

The ability of a computer to handle an increasing number of concurrent users

smoothly is called scalability. This is a critical feature for systems expected to handle
a large numbers of users such as a mainframe computer or a Web server. Because
personal computer operating systems usually are orientated toward single users, the
management of multiple-user tasks often is not needed.

Networking Capability

The operating system can provide features and capabilities that aid users in
connecting to a computer network. For example, Apple computer users have built-in
network access through AppleShare feature, and the Microsoft Windows operating
systems come with the capability to link users to the Internet.

4
Access to System Resources Networking Technologies

Computers often handle sensitive data that can be accessed over networks. The
operating system needs to provide a high level of security against unauthorized
access to the users’ data and programs. Typically, the operating system establishes a
log-on procedure that requires users to enter an identification code and a matching
password. If the identification code is invalid or if password does not go with
identification code, the user cannot gain access to the computer. The operating
system also requires that user passwords be changed frequently. If a user is
successful in logging onto the system, the operating system records the details of the
user and system usage. In some, organizations, these records are also used to bill
users for system and resource usage. The operating system also reports any
attempted breaches of security.

File Management
An operating system performs file management functions to ensure that the files are
available to CPU when needed and that they are protected from access by
unauthorized users. Many computers support multiple users who store files on
centrally located disks or tape drives. The operating system must be able to resolve
what to do if more than once user requests access to the same file at the same time.
Even on stand-alone personal computers with only one user, file management is
needed to keep track of where files are located, what size they are, when they were
created, and who created them.

3.3.2 Language Translators

The CPU (also called processor) of a computer understands commands in machine
language, where each instruction is a series of binary digits. Programming in machine
language is not easy, as programmers have to remember the machine codes, which
are in binary format. To help programmers, other high level programming languages
have been developed whose instructions are easy to remember for programmers as
these languages use English words. C, Java, SQL are examples of high level
programming languages. Programming languages can be divided into assembly
languages and high-level programming languages.

For any program to be executed, it has to be first converted into its equivalent
machine language program and then loaded into the memory of computer. To perform
the translations of programs, language translators are used. As the process of
programming language translations are machine dependent, the translators fall in the
system software category.

Assemblers: The computer software that translates the assembly language

programs into corresponding machine language programs are known as assemblers.
Assembly language uses mnemonics instead of binary codes used in machine
language. For example ADD R1 R2 is an assembly language instruction for adding
the contents of register R1 with the contents of register R2 and store the result in R1.
The use of mnemonics helps programmers to remember programming codes. But still
to write big programs like a word processing software can be very cumbersome in
assembly language.

Compiler and Interpreter: Compiler and interpreter are used to translate a high
level programming language program into a machine language program. As the
translation process is very cumbersome, some compilers first translate the source
code (the program in high-level language) into the equivalent assembly language
program and then use the assemblers for the next step. To define, a compiler is a
program that translates a source text written in a language A into a target program in
language B, whereas, interpreter is a program which directly executes the program in
a given programming language A. 5
Information Technology
for Managers
Program Machine Computer
Interpreter Language
Statement System
Statement
Translation Statement
Excecution

Fig. 3.1 : Working of Interpreter

Difference between Compiler and Interpreter

An interpreter is a language translator that reads the source code line-by-line and
executes them one by one. On the other hand, a compiler first reads the complete
source code and then generates its object code (the equivalent machine language
program).

Interpreter has the advantage that the process of translation takes less time as
compared to the compiler, but the program generated is less efficient as compared to
the compiler in terms of the time is to takes to execute the program.

Compilers are generally used when the efficiency of the generated binary (machine
language) program is desired. Interpreters are mostly used for educational purposes,
where the programmer makes frequent translations of the program as the changes to
the program are frequent. Also, as the interpreter generates the binary program on
the fly, platform independence can be achieved. Platform independence means the
capability of the program to be translated on any platform and executed on any
platform. By platform we mean the hardware and the operating system running on
that system. For example, interpreted languages such as HTML, Perl, and Lisp are
platform independent. Java, which is a half-compiled half-interpreted language, has
benefits of both. As Java programs are compiled to byte-code, instead of binary code,
it can be ported to any platform which has the Java Virtual Machine software, which
interprets the byte-code. By compiling the program to byte code certain level of
optimization that are possible in compilers are achieved.

Step 1 : Program Execution:

Computer Machine
Program Compiler Language
Program
Translations

Step 2 : Program Execution:

Machine Computer
Language System
Program
Program
Exection

Fig. 3.2. Working of Compiler

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Advantages and Disadvantages of Interpreter over Compiler

Advantages
• As compared to compiler no synthesis phase is required in interpreter: Neither
there is a need to learn target language B nor the target code is to be generated.
Thus interpreters don’t have synthesis phase.
• Direct Execution: There is no intermediate compilation phase so the code is
directly executed.
Disadvantages
• Efficiency Loss: As the code is executed on the fly, the efficiency of the program
is low. In compilers, there is a separate phase for optimization of the program
code.
• Interpreter must be available on target machine: The compiled code can be
executed on any similar machine. The code needs not to be compiled every time.
For languages, which are interpreter based, the interpreter must be available on
each machine where the code is to be executed.
Activity A
Why is there a difference between High-Level and low level languages?
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3.3.3 Utility Programs

A utility program is designed for general support to the processes of a computer.
They are usually for routine, repetitive tasks and many users share them. Examples
of utility programs include diagnostic programs, trace programs, input routines, and
programs used to perform routine tasks, i.e., perform everyday tasks, such as
copying data from one storage location to another. Utility programs are also available
commercially; for example, Norton Utilities package is a set of utility programs for
checking disks for computer viruses, checking hard drive for bad locations and
removing them and for performing disk compression.

3.4 APPLICATION SOFTWARE

Application software is a complete, self-contained program that performs a specific

function directly for the user. This is in contrast to system software, which exists to
support application programs. Application software may consist of a single program,
such as an image viewer; a small collection of programs (often called a software
package) that work together to accomplish a task, such as a spreadsheet or text
processing system; a larger collection (often called a software suite) of related but
independent programs and packages that have a common user interface or shared
data format, such as Microsoft Office, which consists of closely integrated word
processor, spreadsheet, database manager, etc.; or a software system, such as a
database management system, which is a collection of fundamental programs that
may provide some service to a variety of other independent applications. Some of the
example application software according to their types are given below in the table.
7
Information Technology Table 3.1: Examples of Application Software
for Managers
Type Software

Word Processing Microsoft Word,

Corel Word Perfect

Spreadsheet Microsoft Excel,

Lotus 1-2-3

Graphics Adobe Illustrator,

Macromedia FreeHand

Desk Top Publishing Quark Express,

Adobe Page Maker,
Corel Ventura Publisher

Activity B

Explain the difference between Applications / Utilities with the help of examples.
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3.4.1 Programming Languages

A programming language is an artificial language (as opposed to natural languages
such as Hindi, English etc.) that is used to generate or to express computer programs.
Both system software and application software are developed using one or many
programming languages.

Generations of Programming Languages

The programming languages have been divided into different generations according to
their characteristics and capabilities.

• Machine Language The first generation of computer programming languages is

machine language. Programs in machine language consist of instructions coded
in of 0s and 1s, thus the alphabets of machine language are 0 and 1. The storage
locations and data items are also specified using 0s and 1s. These languages are
machine dependent. There is a machine language corresponding to each
microprocessor available.

• Assembly Language The second generation of computer programming

language started using mnemonics (like ADD, SUB) to represent machine
language instructions and storage locations. Assembly language is also machine-
dependent. System software or at least part of it is usually developed in assembly
languages.

• Third Generation Language (3GL) 3GL are English-like languages. They use
statements and commands, which are similar to the words used in English. 3GLs
are easier to learn, but less efficient in the use of computer resources as
compared to machine and assembly languages. Typically, a statement in 3GL is
translated into many instructions of machine language. C, BASIC, FORTRAN,
8 COBOL and Pascal are the popular third generation languages.
FORTRAN (FORmula TRANslation): Fortran was developed Networking Technologies
in 1956 by
John Backus. It was developed keeping in mind the scientific and engineering
application.

COBOL (Common Business Oriented Language): COBOL was developed

in the early 1960s under the auspices of the U.S. Department of Defense in
cooperation with computer manufactures, users, and universities. It was designed
to be a language for writing programs for business problems. Another design
objective was to keep it machine independent. The language was designed in
such a manner that it could evolve and grow to take care of changing program
development requirements. Many standards for COBOL have been published
since then.

BASIC (Beginners All-purpose Symbolic Instruction Code): BASIC was

developed in 1964 by John Kemeny and Thomas Kurtz to teach students as
Dartmouth College to use computers. It was meant to be a very simple language
to learn and also one that would be easy to translate. Furthermore, the designers
wished it to be a foundation language for students who wished to learn more
powerful languages such as FORTRAN or ALGOL.

Pascal: It was developed in the late 1960s by Niklaus Wirth of Zurich. He

named it after the great mathematician and philosopher, Blaise Pascal. Both
Pascal and BASIC have been used extensively for teaching to the beginners.

C was developed at Bell Laboratories in 1972 by Dennis Ritchie. Many of its

principles and ideas were taken from the earlier language B and B’s earlier
ancestors BCPL and CPL. C was developed with the purpose of creating a high
level language that could be used for writing machine independent programs and
would still allow the programmer to control the behavior of individual bits of data.
The bit processing features have made C a popular system software
development language.

• Fourth Generation Languages (4GL) : Fourth generation languages are less

procedural and even more English-like then third generation languages. The
emphasis is more on the output format than the procedure applied to achieve the
results. Some fourth generation languages are:
Table 3.2: Fourth Generation Languages

4GLs Salient Feature

Natural, Power Builder, Application Generators
Visual C++, Visual Basic

SQL, RPG-III Query Languages/ Report Generators

Systat, SAS Graph Graphics Languages

People Soft HRMS, SAP R/3 Application Software Packages

• Object Oriented Languages : Object Oriented Programming is a type of

programming in which programmers define the data types and structure of the
data, in addition, the operations (functions) that can be applied to the data is also
defined. The data and functions together are known as objects. Programmers
can create relationships between objects. For example, objects can inherit
9
Information Technology
characteristics from other objects. One of the principal advantages of object-
for Managers
oriented programming techniques over procedural programming techniques is
that they enable programmers to create modules that do not need to be changed
when a new type of object is added. A programmer can simply create a new
object that inherits many of its features from existing objects. This makes object-
oriented programs easier to modify. The object-oriented programming languages
are usually referred to by the acronym OOPL, Java, C++ and Smalltalk are the
popular languages.

3.5 OPEN SOURCE SOFTWARE

Open Source Software (OSS) is primarily defined as software, which is freely
re-distributable and includes the source code. The licenses under which OSS is
released vary greatly. The complete Open Source Definition can be found at http://
www.opensource.org/osd.html. OSS is vastly different from the mainstream software
industry where source code is highly guarded and programs are only distributed in
their binary form, which is non-modifiable format.
The most important aspect of the open source movement is the participation of users.
When a user wants a feature or a bug fix for a commercial program, the user is at
the mercy of the software vendor. However, with open source, the user can modify
the program according to his needs or fix a bug. Many users will help develop the
program for free, simply to improve the product and for the benefit of the community.
These are a few of the most common and popular licenses for OSS.
• GNU Public License (GPL)
• Limited GNU Public License (LGPL)
• BSD-Style License
• The Artistic License
• The Netscape Public License (NPL) and the Mozilla Public License (MPL)
• Apple Public Source License (APSL)
A few advantages of OSS are:
1) Cost Effective: Open source software often comes free. The individual or
organization users can save the software cost.
2) Customizable: Since Open source software comes with the source; one can
customize existing software to suit one’s needs. Closed source software may be
customizable, but you need to negotiate and/or pay for customization. Open
source licenses typically guarantee you the right to be able to customize the
software.
3) More Secure: Since the source code is open, more people scrutinize the source
code, and hence more flaws are found and corrected. The end result is that the
code produced is more secure compared to similar closed-source code.
The following terms are synonymous with Open Source Software: Freeware, Free/
Libre/Open Source Software (FLOSS).

Activity C
Explain the differences between commercial software, shareware, open source
software, freeware, and public domain software.
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10
Networking Technologies
3.6 ACQUIRING APPLICATION SOFTWARE

A company can either develop or purchase software for its use. In some cases, the
purchased software can be modified / customized according to the needs of the
company. The different options available are summarized in the diagram below.

Build the
Software

Application
Software

Buy the
Software

Fig. 3.3 : Sources of Acquiring Application Software

Build the software: If the requirements of the company are unique or specific, then
the decision to build the software may be taken. If the organization has the required
talent and time, it may be built by the company itself. This kind of development is
known as in-house development. Also the company may obtain customized
software from software vendors. Such software developed for particular companies
are called contract software.

Buy the software: The Company has another option of purchasing, leasing, or
renting software from software companies, who develop programs and sell them to
many computer users and organizations. The software developed for the general
market is called off-the-shelf software. They are readily available and many
companies use them to support their business processes.

Customized Software: The Company can also opt to go for a mix of both buy and
build decision. In that case, the company can purchase some off-the-shelf available
software, and customize it to its needs by in-house or external personnel. There are
software vendors in the market who provide a range of services like installing,
modifying software, training end users, etc. They can be contracted to do the
customization.

3.7 SUMMARY

Computer software have developed so much over the past years that it is very
difficult to cover all aspects of the same. System software and application software
represents two broad levels of categorization. System software encompasses of the
operating system, language translators, and the utility programs. Application software
is aimed to solve particular user computing problems. Open source software is
distributed with the source code and freely available at a fraction of cost as
compared to proprietary software. Acquiring application software is an important
business activity and requires to be managed carefully. 11
Information Technology
3.8 UNIT END EXERCISES
for Managers

1) What are the main types of software?

2) What are the main functions of operating system?

3) Define multi-tasking and time-sharing system?

4) Difference between compiler and interpreter?

5) Name different generations of programming languages and their characteristics?

6) What are the advantages of open-source software?

7) Describe the decision making process of acquiring application software?

3.9 REFERENCES AND SUGGESTED FURTHER

READINGS

Laudon C K & Laudon J P, Management Information Systems, Pearson education,

Asia.

Stair R, Reynolds G, Principles of Information Systems; Course Technology.

Turban, T., Ephraim, M. and Wetherbe J., Information Technology for

Management, John Wiley and Sons, Inc., 1998.

12
Networking Technologies
UNIT 4 NETWORKING TECHNOLOGIES
Structure
4.1 Introduction
4.2 Objectives
4.3 Components of a Network
4.4 Types of Networks
4.5 Advantages of Using Intranet and Internet
4.6 The Layered Architectures and Communication Protocol
4.7 Client/Server Architecture
4.8 Summary
4.9 Self-Assessment Exercises
4.10 References and Suggested Further Readings

4.1 INTRODUCTION

There are many networks in the world, some are natural, and some are man-made.
There is a network of veins and arteries in the body and there is a network of
railroads. But these days when we say networks, we mean data communication
networks. Data communication is the movement of computer data from one
computer to another. The data may travel as an electrical or an optical signal on
transmission systems. Such systems are called data communication networks or
simply network. The networking helps us in getting the information fast. If we look
around, we can identify many applications that use networks. One of the prime
examples is the railway reservation system. This system uses networks to find out
the availability of a seat for a passenger. The passenger may be at station A and he
can make a reservation from station B to station C. You may recall that when the
reservation was not automated, a telegram was sent to station B to make a
reservation. The telegram system worked most of the time, but occasionally it did not
reach or it reached after the seats were all reserved. In either case, the passenger
could not be informed. These scenarios have become history. Networks have
changed the life for better.

4.2 OBJECTIVES

After reading this unit, you should be able to

• Identify the components of a network;
• Describe different types of data communication networks;
• Distinguish LAN and WAN, and Internet and Intranet;
• State the advantages of Internet and Intranet;
• Identify the seven layers of the OSI model of network architecture;
• Explain the TCP/IP communication protocol;
• Discuss benefits to an organization due to networks; and
• Describe the client/server model of computing.

1
Information Technology
4.3 COMPONENTS OF A NETWORK
for Managers

A network system consists of hardware components as well as software

components.

The hardware components are the following:

The Server or Host Computer - Host is the computer that has data to be transmitted.

The Client : This is the computer on the other end of the transmission system as the
server. It receives the transmitted data from the server.

The Network Interface Card: Earlier, one had to buy a network interface card
(NIC) separately and install it in the computer. Nowadays, the NIC has become a
standard component of a system. The NIC is the interface between the network
cable and the computer.

The Circuit: The circuit is the pathway through which data travels from the host to
the client. The circuit may be a copper wire or an optical fiber. The commonly used
media are twisted-pair cables and coaxial cables. These days, fiber optic cables are
also being used. Fiber optic cables can withstand higher temperature and has much
higher bandwidth. Microwaves are also used for data transmission. The
communication may take place through wireless medium.

Network Hubs : Hubs are used to connect cables. The hubs come in 4, 8 and 16
port sizes. An 8-port hub can connect 8 systems to the central cable.

Network Operating System : On top of the hardware, there is always special

purpose network software, which makes the hardware work. The Network
Operating System (NOS) is the software that controls the network. NOS have
software for the server as well as for the client. The Novell NetWare is one of the
oldest NOS. Novell supports a wide variety of topologies, protocols and computers.
Microsoft’s Windows NT and Linux are two very popular NOS and are rapidly
growing.

Fig. 4.1: A network

Activity A
Identify 5 services around you that use data communication networks.
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2
Networking Technologies
4.4 TYPES OF NETWORKS

Local Area Network

A local area network connects computers that are in the same building. A network
spread over few kilometers also comes under LAN. The LAN is usually realized
using Ethernet technology or token ring technology. Fiber Distributed Data Interface
(FDDI) is also becoming popular. The transmission rate varies from 10 Million bits
per second to 1-giga bits per second (10Mbps-1Gbps). A computer has a network
interface card such as Ethernet card that connects it to the network circuit. Usually
LAN is under the control of a single organization. The prime objective of LAN is to
facilitate information and resource sharing within an organization. For instance, a
application software which is used by many people in the organization can be installed
on a computer. This computer is connected to other computer by LAN and
everybody can use the same software. The machine on which the software is
installed is often called a server. In the absence of LAN, the same software will have
to be installed on all machines, which may be very expensive. In addition, an upgrade
in the software will require re-installation/modification on all computers.

The server may be a file server, print server or a database server, depending on the
service it provides to its users. LAN is also connected to other LANs through a
gateway. Almost seventy percent of all LANs in the world use Ethernet. Ethernet
uses a bus topology. All computers are connected to one circuit. All messages from a
computer flow on to the central cable and through it to all computers on the LAN. In
other words, messages are broadcasted.
Wide Area Network
A wide area network connects computers in different cities or countries. The
network to connect computers that are thousands of miles apart is not built by an
organization. Instead, the organization uses leased telephone lines.
It is obvious that WAN is not owned by a single organization. It is owned and
managed collectively by many cooperating organizations.
Internet
Internet or Inter-Network is the connection of two or more networks so that a
computer on one network can communicate with a computer on another network.
The Internet is a set of thousands of networks linked together around the world. The
communication between two computers takes place such that the user does not have
to worry about the technology used by the networks. It is easy to find out the location
of another system on the network. The router (also called gateway) acts as an
interface between two networks. The Internet has no central administration but there
are protocols, which are followed by each network of Internet.
Intranet

An Intranet is a network that connects the internal computing resources of an

organization. The prime motive of Intranet is to facilitate information sharing within
the organization with the help of tools such as web browsers. For instance, a
manager can check the inventory level sitting in his own room. Email becomes an
easy way to communicate, without having to worry about the physical presence of
the person on his seat. Intranets operate within the company’s firewalls. A firewall is
a method of isolating the company’s computers behind a device that acts as a
gatekeeper. All outgoing requests for information go to a special computer, which
hides the sender’s machine address but passes on the request. All incoming
information is also checked by the firewall computer. Employees can venture out into
the Internet but unauthorized users cannot come in.
3
Information
Activity B Technology
for Managers
What are some of the benefits of using a firewall for your LAN?
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4.5 ADVANTAGES OF USING INTRANET AND

INTERNET
The present age is called the Information Age. In this information age, the strategic
resource is information. Information is useful only when it is received in time. The
communication networks have become the media of choice for transmitting the
information. The time lag is so little that the data seem to travel in real time. Most of
the business paradigms have changed due to communication networks. A team of
doctors who are geographically apart can analyze the case of a patient
simultaneously. The consumers are able to locate the item of their choice on the
electronic shop, compare quality and prices before they place an order with a
company. They expect the company to keep them informed about the status of their
order. With little technology and proper management, the customer can be made
happy. At the same time, the company can keep a record of their customers and send
them information about their new schemes. The intranet facilitates online financial
planning and project management. We can enumerate some advantages of using
Internet and Intranet as follows.
1) With the help of Internet, an organization can create a web site where they post
information about availability of products. The customers can log on to the site
and check the availability without having to contact an individual in the
organization. The company saves the staff cost and the customer saves time.
The same mechanism can be used to interact with suppliers.
2) The intranet is used to send email, which is a cheaper way of contacting an
individual in terms of time. The online financial planning and project management
are additional facilities intranet can provide.
3) Collaboration project work by the team members who may be geographically
separate is now a reality.
4) The time-to-market a product has reduced considerably. The delay in the product
development phases has also reduced due to faster paperless communication.
5) Videoconferencing provides real-time interaction among people who are
geographically apart. A company can locate its offices based on the availability
of resources. The interaction among employees can take place through
videoconferencing. The company will not have to spend extra on travel and at
the same time, it can save money by locating its offices at optimum locations.
Another advantage of a videoconference is that a person who may be somewhat
shy or introvert can anonymously communicate his idea.

6) There are many dedicated discussion groups on the network. A person can join a
group of his choice and share his knowledge with others and get help from
4 others.
Networking Technologies
4.6 THE LAYERED ARCHITECTURE AND
COMMUNICATION PROTOCOL
Communication over a network is a complex task. The host that wants to transmit the
data must know the address of the client, a route to communicate to the client. Then
it must establish a connection and transmit the data. If an error occurs during the
transmission, the client must detect it and inform the host so that it can re-transmit the
data. It will make life simple if this complex task is divided into sub-tasks. There are
two popular models- OSI and TCP/IP.

The International Standards Organization developed a framework for computer

communication with an objective of providing a standard. The model provided by ISO
is known as Open Systems Interconnection Reference Model, popularly as OSI
model. The OSI model has seven layers. Each layer has a well-defined function and
interface. Development and management of software has become simple due to the
OSI model. The seven layers are briefly described here.

Application Layer

This is the top layer and provides user with an interface to the network. The primary
purpose is to provide a set of utilities for application programs.

Presentation Layer

This layer formats the data for presentation to the user. This layers, for instance,
might compress/uncompress the data.

Session Layer

This layer is responsible for initiating, maintaining, and terminating the network
session on behalf of an application.

Transport Layer

This layer is responsible for creating data units called packets from the data that is to
be transmitted. Each unit is appended with enough information about its source and
destination so that it can travel independently on the network without having to worry
about other packets. The packets are combined at the destination into the original
message. This layer makes sure that each packet has been received and without
error. It may request re-transmission of a packet if required.

Network Layer

This layer accepts messages generated by the transport layer. Its responsibility is to
route packets to the destination.

Data link Layer

This layer is responsible for initiating the physical transmission of the data. This layer
also detects and corrects errors that might have occurred during transmission.

Physical Layer

This layer is concerned with transmission of data bits. This layer defines rules for
transmission, such as voltage.

The TCP/IP model consists of four layers- application layers, network layer, data link
layer, and physical layer. The network layer is equivalent to presentation layer,
5
session layer, transport layer, and network layer of OSI model.
Information Technology
for Managers
Application Layer Application Layer

Network Layer Network Layer

Data link Layer Data link Layer

Physical Layer Physical Layer

Fig. 4.2: Four layers of TCP/IP model

We will briefly discuss Transmission Control Protocol/Internet Protocol next.

TCP/IP
TCP/IP is a protocol suite, which consists of protocols for all four layers. This suite is
used for intranets as well as for Internet. 70% of all networks use TCP/IP. This
protocol provides a reliable stream delivery and virtual connection service to the
applications. The protocol ensures error-free transmission. TCP performs
packetizing- large messages are broken up into smaller units called packets. Each
packet contains the source and destination port identifier. A port is a logical entity that
identifies an application. The web server port is 80, FTP server port is 21, TELNET
port is 23 and SMTP port is 25. The packet also contains its sequence number and
error checking information. The source and destination addresses are also included in
the packet.

The address part needs some explanation. Each computer has some device such as
network card or modem through which computer is connected to the network. This
device has an address. For instance, the Ethernet card addresses are 6 bytes long.
The address is part of the hardware and cannot be changed. This address is unique in
the world. The network administrator assigns a 4 byte address to each computer on
the network. This address is known as IP address. This address has to be unique on
the network. The way this uniqueness is ensured is quite interesting. A computer on
the LAN is assigned an address by the system administrator. These addresses are 4
numbers separated by a dot (.), each number is between 1 and 254.

The intranet addresses are usually 172.x.x.x. The system administrator maintains a
table of assigned addresses and can easily ensure the uniqueness. A computer on the
Internet is assigned an address by the Internet Network Information Center
(InterNIC) who again maintains a table and can ensure uniqueness. The Internet
service providers can get a block of addresses from InterNIC and assign them to
individuals or organizations.

An address can be one of the following types:

Type A: The first byte is fixed by the NIC. The first bit of this byte is 0 for all type A
addresses. The first byte can have value between 1 and 127. The remaining 24 bits
are used to identify the host on the network.

An organization that has obtained a type A address may connect over 16 million
computers to the Internet. Type A address is no more available.

6
Type B: The first two bytes are fixed by the NIC. The first twoNetworking
bits of theTechnologies
first byte
are 10 for all type B addresses. The first byte can have value between 128 and 191.
The remaining 16 bits are used to identify the host on the network.

An organization that has obtained a type B address may connect over 65000
computers to the Internet. Almost 80% type B addresses have already been
allocated.

Type C: The first three bytes are fixed by the NIC. The first three bits of the first
byte are 110 for all type C addresses. The first byte can have value between 192 and
233. The remaining 8 bits are used to identify the host on the network.

An organization that has obtained a type C address may connect 254 computers to
the Internet. Almost 30% type C addresses have already been allocated.

There are Type D and Type E addresses also which are not for commercial use.

An organization has the freedom to divide its computers into various clusters and
each cluster forms sub-network, referred to as subnet. The address of each
computer on a subnet has same first three digits. The subnet mask identifies the
subnet part of the address. The subnets are connected to each other by a gateway.

The IP address may be static or may be dynamic. A static address is assigned to the
computers that are permanent members of the network. The computers that connect
to the network through a modem are usually assigned IP address dynamically.
Dynamic Host Configuration Protocol (DHCP) is part of the TCP/IP suite for
dynamic addressing. A client can be assigned an IP address dynamically by DHCP
server.

It is not so easy to remember 4 decimal numbers for each computer that one might
like to communicate with. The name that a human being can remember easily is
assigned to each server. These addresses are like www.iitk.ac.in or ftp.iitk.ac.in etc.
These addresses are known as application layer addresses. A user wants to
communicate to, let us say ftp.iitk.ac.in for a file transfer. This address must be
converted to IP address and then to hardware address.

Domain Name Service protocol (DNS) translates server address to IP address.

There are name servers, which maintain a special database of IP addresses and
application layer addresses. There are thousands of name servers across the globe. If
a computer does not know the IP address for an application layer address, it sends a
request to name server. Other computers can reach a computer only if its address is
a part of the database of at least one name server. This is the reason no one can just
assign an address to its computer and expect to be found without the knowledge of
InterNIC. Each computer can update its local database as more and more addresses
from the name servers are learnt.

The ARP is used for converting an IP address to the hardware address. The protocol
is based on broadcast; the computer trying to send a message to a particular IP
address broadcasts a message asking for its hardware address. The computer with
requested IP address responds back. The requesting computer also maintains a
database of IP addresses and corresponding hardware addresses.

To send a message to a computer on another network, the sender needs to know a

route to the destination. In static routing, the network administrator develops a routing
table. In dynamic routing, the initial routing table is created by the system
administrator as in case of static routing. The system then updates its routing table
depending upon the situation of the network.

7
Information
A message isTechnology
broken up into packets. All the packets may travel independently on
for Managers
possibly different routes. This type of routing is known as connectionless routing. If
all packets of a message are forced to travel same path, then a virtual circuit is set
up. This type of routing is known as connection-oriented routing.

World Wide Web

The World Wide Web (WWW) made the Internet popular among people who were
not part of the academic community. The Internet became popular primarily because
of www applications. The prime objective of www applications is to facilitate sharing
of text and image files. The www applications are implemented using client/server
architecture. The server runs a software package called web server and clients run
web browsers. The most popular web browsers are Netscape and Internet Explorer.
Popular servers are Apache, Tomcat, Netscape server, and Microsoft server.

In order to get a page from the Web, the address of the desired page is typed into the
browser. The user must know the address of the page in order to request the page.
The web address is like any other address. It has components such as domain and
computer name. Each computer on the Internet has a unique address. Each address
is assigned by one of the address assigning board such as InterNIC. These boards
ensure that there are no duplicate addresses. Each address has computer name
followed by domain name. Some of the well-known domains are as follows. The
domain “edu” is reserved for educational institutes, “com” is for commercial
organizations, “gov.in” is for government departments of India.

There are special software known as search engines which help a user in locating a
web site. Popular search engines are google, altavista, yahoo, khoj etc. The user can
run a search engine and type some keywords and the search engine locates many
web sites, which have documents containing the keywords. The user may decide to
then visit one or more sites. The sites listed by a search engine may run into millions
and most of the sites may be irrelevant. Usually the top few sites are most relevant.
The search engine maintains a database of all the web sites and this database is
updated frequently.

The web server and the client both follow Hyper Text Transfer Protocol (HTTP) to
communicate with each other. HTTP is an application level protocol for hypermedia
documents. A virtual connection is established between the client and the server.

File Transfer Protocol (FTP) enables a host to send and receive files over the
network— intranet as well as Internet. In a file transfer, there is a client that requests
the transfer and there is a server, which entertains the request. There are many
graphical FTP clients available these days, e.g. gftp on linux and ws-ftp on windows.
A file transfer can be either closed or anonymous. In a closed file transfer, file
transfer requires a valid login/password, which is given by the system administrator.
An anonymous file transfer can be initiated by anyone. For a file transfer under ftp, a
virtual connection between client and server is established to transmit control
information. Another virtual connection is established for data transfer.

Telnet : The telnet application enables a user on one computer to log on to another
computer on the network. A virtual connection between the client and the server is
established. The connection is used to transmit data. The protocol gives client an
option to emulate graphics terminal.

8
Networking
Email : Electronic mail is one of the oldest applications of Internet Technologies
and it has become
the most common way of communication. Email can be used to send a message to an
individual or to a group of people. Text, formatted document, or an image in any
format can be sent via email. The email uses client/server architecture. Clients are
very advanced and provide amazing facilities. The user can create named folders and
can save selected messages into the folder. It is almost like filing letters into a
cabinet. A message can be sent to one person and a copy can be sent to another
person. The message can be sent with a request for an acknowledgment. A message
can be forwarded, deleted, or replied to. There are many protocols for email server
as well as client. Simple Mail Transfer Protocol (SMTP) and Post Office Protocol
(POP3) together form a complete mail transfer protocol. An SMTP server receives
emails and stores them. The client can use POP3 to fetch and store emails in the
individual local mailbox.

The SMTP server and POP3 client combination is quite popular these days.

A workstation running POP3 can dynamically access the SMTP mail server and
retrieve the mails on it. A POP3 client makes a connection to the server either on
demand or on regular intervals. If there is a mail, it is retrieved and the connection is
aborted. POP3 seems inadequate if user would like to have the freedom to access his
mailbox from anywhere. Internet Message Access Protocol version 4 (IMAP4)
allows a client to access and manipulate mailboxes on an SMTP server as local
mailboxes. The mail stays on the server and user can access his mailbox from any
computer running IMAP.

When you install a new computer on the network, you must obtain an IP address

4.7 CLIENT/SERVER ARCHITECTURE

In the days of mainframes, the central server used to be a powerful machine. The
software and the data both were stored on the main frame. There used to be a set of
terminals that people used to connect to the server. This simple architecture is known
as host-based architecture. Along the passage of time, the terminals were replaced
by computers, which were not as powerful as the servers but were more powerful
than the terminals. The server became the file and database server, which stored the
data, but the application software ran on the client computers. As the applications
became complicated, the network traffic increased and people started looking for an
alternative. The client/server architecture was then proposed and it became very
popular.

In the client/server model, a machine that provides a service is called a Server. The
machine that makes use of the service is called a Client. For instance, server may
store the database of an organization. A client connects to the database server for its
needs. The client and the server work independently in a co-operative manner. The
architecture facilitates the addition of a new client or server to the network. A server
usually can handle many clients simultaneously. Therefore, most servers are powerful
machines such as mainframes, minicomputers, workstations etc. The clients need not
be as powerful as the servers and they usually are not. The clients and servers are on
the network. But each server is assigned one or more specific tasks. For instance, a
file server is used to manage user data files, a network server may control network
connections. A database server stores the data of the organization and provides
different levels of access to different clients. The servers provide their services

9
Information
through humanTechnology
readable names and well-known ports. When the client makes a
for Managers
request, it is not aware of the physical location of the server, or the processes of the
server. The server details are hidden, but services are transparent. This is known as
“service transparency”. It is an important feature of client/server architecture.

A request made by a client may involve data access, data processing, and result
rendering to the client. The data access, the processing, and the presentation can all
be done by the server or they can be shared between the server and client. The
client/server implementation is called “distributed presentation” when all three
components are on the server, and the client has part of presentation logic.

In remote presentation, the data storage and management and application logic is
handled by the server, but the presentation logic is handled by the client.

In distributed logic arrangement, the data storage and management is handled by the
server, the presentation is handled by the client and the application logic is shared
between the server and the client.

In remote data management model, the data storage and management is the
responsibility of the server and the other two functions are handled by the client.

In distributed database model of the client/server architecture, the client handles part
of the data storage and management of application logic and presentation. The server
compliments data storage and management job of the client.

A client is called a thin client if it only handles the presentation job. A client is a fat
client if it supports data storage, application processing, and presentation.

Client/server architecture is scalable. A new server can be added to the network, an

application or part of it can be moved to another machine. The architecture supports
heterogeneous hardware and software. One system may run NT operating system
and another one can run Linux and they can form a client/server pair. The failure of a
network segment or a computer does not bring the entire system down. The client/
server architecture reduces the unnecessary network traffic. The required part of the
data stored on the server is transmitted to the client over the network. The file and
data management is easier because only a single copy of data is stored at the server.
The server controls the access and usually different people have different level of
access.

4.8 SUMMARY

This unit has given you an introduction to the data communication networks and their
importance to an organization. The components of a network are described which are
same for all types of networks. A network operating system is also an integral part of
a network. The protocols- OSI model and TCP/IP are the main protocols, which
were described in detail. The TCP/IP is a suite of protocols which has application
layer protocols, network layer protocols, data link layer protocols and physical layer
protocols. The application layer protocols and network layer protocols were described
in some detail. The client server architecture was also explained.

10
Networking Technologies
4.9 SELF-ASSESSMENT EXERCISES

1) Describe the main components of a network including hardware and software.

2) Describe various types of networks.

3) Distinguish between LAN and WAN.

4) Distinguish between Internet and Intranet.

5) Write a detailed note on the advantages of networks.

6) Describe TCP/IP protocol suite briefly. You may include any five protocols in
your note.

7) Describe Client and Server architecture.

4.10 REFERENCES AND SUGGESTED FURTHER

READINGS
FitzGerald, J. and Dennis, A., Business Data Communications and Networking,
John Wiley & Sons, Inc.

Tanenbaum, A.S., Computer Networks, Prentice Hall PTR.

11
Information Systems
UNIT 5 IN MIS PERSPECTIVE Economics

Structure
5.1 Management Information Systems : An Introduction
5.2 Objectives
5.3 Historical Background
5.4 Status of MIS in Organizations
5.5 Framework for Understanding Management Information Systems
5.6 Organization and Information System— Two Way Relationship
5.7 Summary
5.8 Unit End Exercises
5.9 References and Suggested Further Readings

5.1 MANAGEMENT INFORMATION SYSTEM :

AN INTRODUCTION

The subject of management information system (MIS) has different meaning for
different people. The concept of MIS has evolved over a period of last two decades
or so. The initial management information systems were built to process
transactional data of an organization and to produce regular reports. The reports
were not targeted and individuals picked the required data from the report. The
information systems evolved further and produced different reports according to
requirements. Instead of user looking through the report for required data, the
system generated a report in a suitable format that created an impact on its user and
provoked an action, a decision or an investigation. Today, an information system has
evolved to the stage where they handle databases and facilitate decision-making.
Accordingly, definition of MIS has also evolved. There are many closely related
definitions in use. The terms MIS is synonymously used with terms the Information
System (IS), the Information and Decision System and the Computer based
Information System.

The MIS is defined as an integrated system of man and machine for providing the
information to support the operations, the management, and the decision-making
function in the organization.

The above definition emphasizes an association between MIS and decision-making.

An application software that processes data, which is not used for decision-making,
cannot be called an MIS. For instance, a computer-aided design system is not an
MIS.

An MIS deals with information that is systematically and routinely collected in

accordance with a well-defined set of rules. In other words, data collection is a
planned activity for which resources are allocated and rules are defined.

The information provided by an MIS assists managers in planning, organizing,

staffing, coordinating, directing and controlling the operations of an organization. The
management experts have viewed these steps as Management Control system. The
following figure shows relationship between operations, planning and control.

5
Information Systems-I
Planning

Plan & Targets

Control

Conective Actions
Operations

Fig. 5.1: Management Control System

In any organization that has planned activities leading to the achievement of the
stated goals, there is always a control process in place that measures progress
towards these goals and enables the manager to deduct the deviations from the
original plan in time. It is the responsibility of the management to take corrective
actions before it is too late. The deviations may be due to environmental changes or
due to the mistakes made by people. An MIS is concerned with planning and control.
An MIS has large amount of data as its integral part that is stored and managed by a
data base management system.

An MIS must have the following features:

1) It must be capable of handling voluminous data. The data as well as transactions
must be validated.
2) It must be able to perform operations on the data irrespective of the complexity
of the operations. Often time multi-dimensional analysis is required
3) An MIS should facilitate quick search and retrieval of information. An MIS must
support mass storage of data and information.
4) The information must be communicated to the recipient in time. Moreover, the
communicated information must be relevant.

5.2 OBJECTIVES

After reading this unit, you should be able to:

• Describe the evolution of MIS;
• Identify the main features of a Management Information System (MIS);
• Enumerate the development of MIS and its present status in the organizations;
• Explain the Anthony and Simon framework for understanding the MIS and
decision-making process; and
• Appreciate different viewpoints regarding applications of MIS in organizations.

5.3 HISTORICAL BACKGROUND

Since 1950s, computers have been used to perform common business applications in
the developed countries. The use of computer for keeping track of transactional data
in organizations in India started in 1980s. An organization employs a large number of
clerks to record business transactions. A transaction is any business-related
exchange such as payment to employees, sales to customer, purchase order placed to
a vendor, payment received from a customer etc.
6
With the help of computers, organizations automated the process expecting to reduce Information Systems
errors and cost. The very first application of computers in business was to create a Economics
transaction processing system (TPS). A TPS is an organized collection of people,
procedures, software, databases and devices used to record business transactions.

The initial TPS were used for automating payroll systems. The input to the payroll
transaction processing system is the hourly pay rate and number of hours worked.
These systems also calculated income tax for each employee and generated reports
for tax collecting body. The benefits provided by an effective transaction processing
system are tangible and can be quantified. They speed up the processing of business
activities and reduce clerical costs. The scope of TPS widened in due course of time
to include all aspect of accounting and financial transactions.

The TPS provided no help to the managers and decision makers. The Management
Information System (MIS) were then built to provide routine information to managers
and decision makers.

View 1 View 2
Management
Information
View 3 System
View 4

Database

Fig. 5.2: Management Information System.

The Figure 5.2 shows that an MIS uses organization’s transaction processing system
and prevents different view of this data to different people. The sales managers
would be interested in sales data and accounts officer would be interested in
accounts receivable and payable data. In 1960s, the organizations realized the
potential of MIS and started funding MIS projects. MIS produced routine reports,
demand reports and exception report.

In 1980s, the personal computers made computing facilities within reach of small
organizations as well. People at each level started using personal computers to do a
variety of tasks. Decision makers started using the information held by computers.
The decision making process was further supported by decision support systems
(DSS). A decision support system is an organized collection of people, procedures,
software, databases and devices to support problem – specific decision-making. An
MIS helps an organization “do things right”, a DSS helps a manager “do the right
thing”.

Information systems have been evolving ever since. Workflow Systems, Enterprise
Resource Planning systems, and expert systems have been built to assist managers in
the process of decision-making. One thing is very clear that none of these systems
were a substitute for the manager they only assisted the manager.

7
Information Systems-I
5.4 STATUS OF MIS IN ORGANIZATIONS
Information systems are used in all functional areas and operating divisions of
business. In finance and accounting, information systems are used to forecast
revenue and business activity, determine the best sources and uses of funds.
Information systems have been used for managing cash and other financial
resources, and analyzing investment. Financial health of an organization is also
checked using IS. In sales and marketing, information systems are used to develop
new goods and services (product analysis), determining the best location for
production and distribution facilities (site analysis), determine the best advertising and
sales approaches (promotion analysis) and set product prices to get the highest total
revenues (price analysis).

In manufacturing, information systems are used to process customer orders, develop

production schedules; control inventory lends and monitor product quality. Service
industries such as airline industry and railways use information systems to serve their
customers better. Banks and other investment firms’ use IS to make good
investments and sanction sound loans. Publishing houses, healthcare organizations,
and retail companies all make use of information systems to serve their customers
better and maximize their profit.
Activity A
Detail some functional MIS systems in your organization or any organization of your
choice. What are their distinguishing characteristics? Why are they failures or
successes?

..............................................................................................................................

5.5 FRAMEWORK FOR UNDERSTANDING MIS

There is too much data and information in an organization. In order to design a MIS
successfully, we need a framework to structure the information so that the data and
information relevant for decision-making can be separated from rest of the data.
Before we talk about the design of MIS, let us understand the strategic management
of a business. An organization must respond to market forces, competition, to
environment and to technological changes. The scope of business is wide, touching
many fronts. A business, among other activities, must do a long-term strategic
planning. There are many methodologies for strategic planning. According to model
presented by Robert Anthony, the strategic planning is one of the major activities in
business planning and control. The other two are the management control and
operational control. This framework is illustrated below:
8
Information Systems
Economics
Strategic Planning

Management Control Planning and

Control Systems

Operation Control

Fig. 5.3: Framework of business planning and control

1) Strategic Planning is the process of deciding objectives of the organization,

determining the possible shift in objectives, deciding on the resources used to
attain there objectives and the policies that govern the acquisition, use and
disposition of there resources.

2) Management Control is the process by which managers assure that the resources
are obtained and used effectively and efficiently to attain the objectives of the
organization.

3) Operational Control is the process of assuming that specific tasks are carried out
effectively and efficiently.

It is useful to classify the above definitions with some examples. The table below
gives instances of planning and control activities in different functional areas.

Table 5.1: Planning and Control Activities in Different Functional Areas

Strategic Planning Management Control Operational Control

Production Location of a Determine the product Scheduling specific jobs
new factory mix for a monthly on specific machines in
production program a shift

Marketing Entering the Media planning for Planning sales contacts

export market advertising expenditure to be made by a salesman
in the next week

Finance Raising capital by Determining maximum Determining what action

issuing new shares levels of credit for to take against nonpayment
customers by a specific customer

Personal Deciding on changes Determining who will Determining which

to be made in the be promoted to fill a workers will be on each shift.
organization structure vacated post at middle
and lower levels, in the
organization.

Anthony’s framework enables us to understand the characteristics of information

needed to support the three types of planning and control process. The Table 5.2
below depicts these characteristics and highlights the substantial differences in
information required for strategic planning, management control, and operational
control.

9
Information Systems-I Table 5.2: Differences in Information required for three types of
Planning and Control Processes
Information Strategic Management Operational
Characteristic Planning Control Control
1 Volume Low Intermediate High
2 Level of Aggregation High Intermediate Low
3 Frequency of use of a Low Intermediate High
particular type of data
4 Currency requirement Low Intermediate High
5 Accuracy Low Intermediate High
6 Scope Wide Intermediate High
7 Source Significant amount Mostly Internal Entirely
from external sources Internal
8 Predictability with user Low Fairly High Very High
9 Variability with user High Intermediate Low
10 Distance of user Fair Fairly close Close
(in organizational terms)
from sources within
organization

Let us now look at Simon’s framework that has broken down the process of decision
making into three stages:
1. Intelligence: This is the stage in which the decision maker recognizes that there
is a problem or opportunity that requires him to make a decision.
2. Design: The decision maker determines the alternatives that are available to him
to resolve the problem or exploit the opportunity.
3. Choice: In this stage, an alternative generated in stage-2 is singled out to be
pursued. The selection process may involve feasibility analysis or cost-benefit
analysis.

With this framework, we can distinguish between three major classes of decisions.

a) Programmed Decisions are there in which all stages are handled by following a
preset well-defined procedure. The decisions are repetitive and routine which
arise often and are capable of being modeled mathematically in their entirety.
The classic example would be inventory-ordering decisions.

b) Non-programmed decisions are difficult to structure in logical-mathematical

terms. There decisions cannot be handled in well-defined and pre-specified
procedures. There opportunities are not repetitive in nature and they require
fresh intelligence, design and choice phases to be executed. An example would
be the decision to set up a new factory or launch a new line of product.

c) Semi-programmed decisions are those in which at least one and no more than
two of the above stages can be handled by well-defined preset procedures. An
example where the intelligence phase is well structured would be the diverse
kinds of variance analysis. A comparison with a budget or standard is undertaken
in a well-defined way to signal the need for a decision. Subsequent stages of
design and choice, however, are not handled by a set procedure.

Recall that an MIS support problem-specific decision-making. Depending on the

framework used by the organization for decision-making and goal set for MIS, the
10 designer should determine the information needs.
An MIS should not automate the existing procedures. MIS should act as a catalyst Information Systems
of change in the processes of an organization. For instance, a private bank sanctions Economics
loans by using a sequential process. An applicant applies for a loan, the details
provided by him are verified, and his application details are entered into the bank
application format along with his credit limit. The computer application is then passed
on to the loan sanctioning authority. The process takes two weeks time even though
the staff spends about thirty minutes on the application. A workflow system should
not automate the existing process. It should aim to reduce the application processing
time to less than a week. The present workflow systems let everyone look at the
application simultaneously and each concerned person adds his feedback. The
sequential process has been changed to a parallel process. The total time has come
down to less than a week.
According to Zani, the important determinants of MIS design are:
1) Opportunities and risks
2) Company strategy
3) Company structure
4) Management and decision-making process
5) Available technology
6) Available information sources.
An MIS should be designed, viewing the organization. A company’s structure sub-
divides essential tasks to be performed, assigns them to individuals, and spells out the
interrelationships of their tasks. The organizational structure and the tasks determine
the information needs of the company.

The MIS designer must plan to deliver reports in line with the organization structure.
This means that the main decision makers and the power centers must be recognized
in the MIS. If the decision-making responsibilities are clearly defined and allocated in
the organization, MIS must capture them. If the organization culture provides
sufficient incentives for efficiency and results, the MIS support this culture by
providing such information, which will aid the promotion of efficiency.

The organization system is an open system and MIS should be so designed that it
highlights the changes to the concerned level in the organization so that the action can
be taken to correct the situation.

The designer of the MIS should take care of the data problems. The input data to the
MIS may contain bias and error. The inputs to the MIS must be controlled to ensure
impartiality, reliability and consistency.

If the organization culture provides sufficient incentives for efficiency and results, the
MIS should provide information that will aid the promotion of efficiency.

If the organization is an open system then MIS should be designed to highlight critical
changes in the system or in its environment.

In designing an MIS there are two types of situations one may come across. If the
organization has no experience of computing applications, which will create the
maximum impact on the organization, it can be identified by using Zani’s framework.
Key success variables are however seldom obtained through a questionnaire survey
of managers. Data on environment, past company performance must be analyzed
and discussed to identify key success variable. It is sometimes useful to pen down a
quantitative measure of such variable. For example the performance of a textile unit
can be summed up through two indicators: contribution per loom shift and fixed cost
per loom shift. Similarly the performance of a shipping company may be measured as
11
Information Systems-I gross operating profit per day per voyage. Precise definitions of performance
indicators enable the analyst to understand and quantify the likely impact of
improvement in different task of planning and monitoring.

An analysis of the company’s key success variables can be done only after a
thorough understanding of the company’s operations. Consultants and vendors who
do not spend adequate time in understanding the operations are unlikely to throw up
application areas, which will create the maximum impact. They are likely to suggest
“off-the-shelf” applications. One should use standard software, which is available for
such applications.

For a company getting into computerization for the first time, a list of applications
would have to be generated, keeping in view a 4-5 year perspective on the basis of
which a suitable configuration would be decided. However the development and
implementation of the applications would have to be done in a phased manner. The
first few applications must be those, which can create an impact on the performance
of the organization, are quick to implement with the least amount of changes in the
existing procedures and systems. Initial success can make the later implementation
of complex and more involved systems easier.

For organizations, which have been into data processing and would like to graduate to
MIS, the choices are somewhat limited. Existing computer technology, manpower,
and past experience with computer applications etc., all such factors will condition the
future growth of MIS.

By and large an effort is made to create useful databases, which capture data during
the execution of routine data processing systems. Such data are then analyzed to
produce periodic planning report for monitoring.

Examples of such systems are the sales analysis based on invoice processing;
inventory control based on stock accounting; costing and profitability analysis on the
basis of financial accounting system. Marginal additions to data fields, new coding
structure, and revised procedures are introduced to make the data base and reporting
more useful.
Factors Facilitating Implementation of MIS
A few factors, which will increase the chances of a successful implementation of
MIS, are:
1) Involvement of top management in the computerization effort, in defining the
purpose and goals of computers within the organization.
2) Selection of an EDP Manager who has the political skills to involve managers in
choosing application areas, identifying information needs and designing reports.
3) A computer staff, which has interdisciplinary skills in computers, management,
and operations research.
4) A balanced expenditure on hardware and software.
Activity B
Can you visualize MIS without computers? Justify your answer.
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
12
Information Systems
5.6 ORGANIZATION AND INFORMATION SYSTEM Economics

– TWO-WAY RELATIONSHIP

A system is an assembly of elements arranged in a logical order to active certain

objectives. An organization is also a system. H. J. Leavitt advocates that an
organization should be viewed as a socio-technical system consisting of people, tasks,
technology, culture and structure. The modified Leavitt’s model is shown in the
Figure 5.4 below:

Tasks

People Structure
Goals

Technology Culture

Fig. 5.4: An organization as a socio-technical system

An organization is an open system that has the capacity to adjust itself to the
changing environment. The goals of an organization change in response to the
changes in organization or in its environment. The organization must change as
system to stay in tune with the goals.

MIS should be designed viewing the organization as a system. MIS design should
give due weightage to the human side of the organization and its culture. MIS should
be designed to give reports to main decision maker. In other words, the designer
must study the organization structure and identify the power centers.

In a tall hierarchy with a high degree of centralization, the MIS should give control
information to the higher management.

If the organization is structured on a functional basis, then the MIS should have a
functional design.

If the organization works on a standardized system where rules, policies, systems and
procedures have been laid down, then there become part of the MIS.

5.7 SUMMARY

This unit has given you a fair understanding of the main feature of a Management
Information System in Organizational Context, describing its various functions,
importance and relationship with planning, control and operations in an organization
i.e. what an MIS is and what it is not.

Further, the unit systematically leads you to the prevailing status of MIS in
organizations, discussing the ever growing need of information and its proper handling
(processing), which in turn led to the development of MIS and advent of computers
therein to cope with the hazards faced in coordinating and managing the
organizational challenges. We have also discussed different viewpoints about the MIS
13
given by same management scientists.
Information Systems-I
5.8 UNIT END EXERCISES
1) Define MIS. What are the main features of an MIS?
2) Write a brief note to explain the evolution of MIS.
3) What are the functions that MIS supports in an organization?
4) What is Simon’s framework for decision-making? How does it help in MIS
design?
5) What are the determinants of MIS design according to Zani?
6) Explain the following statement, “there is a two way relationship between
organization and Information Systems”.

5.9 REFERENCES AND SUGGESTED FURTHER

READINGS
Davis, G.B., 1974. MIS Conceptual Foundations, Structure and Development,
McGraw Hill: New York.
Jawadekar, W.S. 1998, Management Information System, Tata McGraw Hill
Publishing Company Ltd.
Kanter, J., 1972. Management Oriented MIS, Prentice Hall Inc: Englewood-Cliffs.
Zani, W.S., 1973., “A Blue Print for MIS”, Harvard Business Review.

14
Information Systems
UNIT 6 INFORMATION SYSTEMS Economics

ECONOMICS
Structure
6.1 Introduction: Growing Need of Information
6.2 Objectives
6.3 Data, Information and Knowledge
6.4 Value and Cost of Information
6.5 Information Systems: Success and Failure
6.6 Summary
6.7 Unit End Exercises
6.8 References and Suggested Further Readings.

6.1 INTRODUCTION: GROWING NEED OF

INFORMATION

In ancient times, people were required to keep record of their possession so that
governing body could tax them. Government and traders kept records to plan their
activities better. As society became more structured, the manufacturing sector also
got structured in the form of factories. As factories grew in size, it became necessary
for factory owners and managers to keep records of inventory and accounts.
Management needed more information for internal decisions. Investors, on the other
hand, needed information about the organizations, its soundness, and health. In spite
of the technological developments, there is an ever-increasing pressure for more and
more information.

Information and Information Technology have become a strategic necessity. The

business environment is no more as stable as it used to be and it has become much
more competitive. It has become mandatory on the part of the organizations to make
full use of information with the help of technology to service. In an organization,
information and technology exist in the form of an information system. Whenever, an
external or internal pressure is anticipated or felt by the organization, information
system (IS) helps the organization to plan critical response activities. The individuals
are supported by IS to fulfill their roles. The organizations use IS to track consumer
behavior. A shift is the consumer behavior may trigger a change in the marketing
strategy of an organization in a timely manner. The organization may take proactive
measures rather than firefighting measures.

There was a swing from integration to fragmentation. Now we are trying to integrate
once again. Most organizations were controlled and managed by single individuals.
But as the business diversified and grew, it became necessary to delegate authority
and responsibility to others. The communication lines and their length measured. As a
result, the owner often had very little knowledge and control on the decisions made at
the lower levels. More people at the lower levels got involved in their immediate
problems losing sight of the organization’s overall goals. The situation is depicted in
the following Figure:

1
Information Systems-I
Level I

Level II

Level III

Level IV

Fig. 6.1: An organization as a hierarchical unit and arbitrary communication channels

At Level I is the owner, Level II has middle management, Level III is lower level
management and at level IV are the workers.

Too many communication channels got established. The situation is changing and
some kind of structure is being introduced. The content scenario is closer to what is
shown below in Figure 6.2

Level I

Level II

Level III

Level IV

Fig. 6.2: An organization as a hierarchical unit and hierarchical communication channels

With increased size of organization, the volume of data generated within the
organization also increased. The information for rational decision-making, however,
became more difficult to extract from the pile of data.

6.2 OBJECTIVES

After reading this unit, you should be able to:

• Define data, information and knowledge;
• Appreciate the growing need for information;
• Reveal the relationship between data and information, information and
knowledge;
• Explain the concepts like cost and value of information; and
• Illustrate the main reasons for success and failure of an MIS.

6.3 DATA, INFORMATION AND KNOWLEDGE

Data is raw material with which we start and information is the finished product.
For example, look at the following links:
1234 5000.00
2345 7000.00
3456 4500.00
2571 8000.00
2
You would agree that the above lines contain data. But in the present form, the above Information Systems
data is useless. Let me now put the data in the proper context as follows: Economics

Account Number Money withdrawn

on 25/02/2004
1234 5000.00
2345 7000.00
3456 4500.00
2571 8000.00

The data is now usable and we can process it to extract information such as the
amount withdrawn from account number 1234 is 5000.00. We can consolidate the
data and extract the information that 24500.00 Rs. were withdrawn on 25/2/04.

Information has been defined as

Data that have been put into a meaningful and useful context and
communicated to a recipient who uses it to make decisions it reduces
uncertainty, reveals additional alternatives or helps eliminate irrelevant or poor
ones.

Returning back to our example, the bank manager may decide the amount of required
cash based on the information of total money withdrawn.

The information makes a person more knowledgeable. Knowledge is an awareness

and understanding of a set of information that help decision-making. Knowledge
makes a person wise. The sequence is the following-data is processed to get
information; information makes a person knowledgeable, knowledge adds to the
wisdom.

The information should have certain characteristics to be valuable to its recipient.

These characteristics vary from being accurate to secure. If information is not
accurate, the decision maker may not rely on the information. The situation becomes
worse if the recipient of the information is not aware of its inaccuracy. The decision
maker may use inaccurate information assuming it to be accurate. The following is a
comprehensive list of desired characteristics:

1) Accurate: The information should be accurate and error free. The information
may be inaccurate due to incorrect data that has been used to generate
information. The data may be inaccurate due to human error. This is commonly
referred to as garbage-in-garbage-out (GIGO).

2) Complete: The information must be complete. The information should not have
been filtered that presents a biased picture to the recipient. Let us say,
salespersons of organizations are reporting sales information to the sales
manager. They make those sales for month of July are exceptionally low. They
delete this information from their report whereas the sales manager might be
interested in July sales just as much as in other month’s sales. He might even be
aware of the seasons for the dip and might be planning to boost sales in July. The
incomplete information may be useless for him.

3) Economical: We all understand that information has an associated cost and it is

expected to be beneficial for the recipient. The benefit must be much greater
than the cost.

3
Information Systems-I 4) Flexibility: Let us understand flexibility through an example. In a bank, the bank
manager would like to know the total amount withdraw and deposited through
transactions distributed and recovered through bank. A client would like to check
the total money he withdraws from his account and his present balance. The
information that the bank possesses should be flexible enough to present different
views of data to different people.

5) Reliable and verifiable: Information is said to be reliable if one can depend on

it. The some of data and information both should be reliable. In case, there is any
doubt or the user wants to be absolutely sure, he might like to verify.

6) Relevant: This Characteristic is self-explanatory.

7) Simple: The information must be presented in proper format to make it simple

for user. Too much information may result in information overload. The user may
not be able to extract important information.

8) Timely: The information may loose its value if it is not received in a timely
manner. Imagine reading yesterday’s newspaper today.

9) Accessible and secure: The information should be easily accessible to

authorized persons. At the same time, the information should be secure from
unauthorized users.
To summarize, information is the result or product of processing data as depicted
below.

Data Processor
Information

Data life cycle

We can think of data having their own life cycle namely, data generation, data
manipulation, transmission of data (and communication of information) and storing/
retrieving and reproduction data.

The generation of data could take place internally and/or externally. This data has to
be captured by recording of data from an event or occurrence in some from such as
sales slips, personnel forms, purchase order etc.

The captured data would have to be stored either in person’s mind or in document or
in ‘mechanical’ or electronic device, microfilm, and punched cards/tapes or in device
of some suitable form before they may be operated upon or authorized.

Stored data would have to be retrieved by searching out and gaining access to
specific data elements from the medium where it is stored.

Retrieved data may be converted or reproduced to different form storage or

presentation format by way of documents reports etc.

Data are also constantly being transported to the user in processed from. It is
transferred to storage from the source, then processed and passed on the user, who
again returns it to storage after working on it, which becomes available for further
retrieval.

The randomly accumulated data has to sorted and classified to reveal appropriate
information. For example, sales data can be classified product-wise, territory-wise,
4
salesperson-wise etc. Such a classification will give the sales data more meaning. Information Systems
Economics
Sometimes aggregation or synthesis of many pieces of data to structure a meaningful
whole or complete report is often required.

Processing of data might entail quite a bit of manipulation and calculations involving
addition, subtraction, multiplication, division etc. based on certain formulae.
Computations might have to be performed for deriving employee’s pay, customer’s
bill, financial ratios etc. Management science/operational research models might be
used for determining optional product mix, aggregate planning, and economic order
quantity determination.

Data stored must be utilized on some occasion by some one at some point of time;
otherwise there is no point in putting it in the inventory. When data is finally put in a
usable form it can be retrieved and turned into information at appropriate time for
decision-making.

Some types of a continuous verification and evaluation of data ought to be taken

because there is also an economic aspect of cost processing data versus the value of
information. Therefore, data files should be continuously monitored to eliminate
useless data.

It is important to destroy data following its evaluation or use. Destruction of data

records may be on a purely routine basis following one time use or may occur in
review of old records. Destruction is the terminal stage or the end of the data life
cycle. The data life cycle is portrayed in Figure 6.3:
Store Retroeve

Sort

Generate
Store Manipulate Utilize

Synthesize

Destroy

Fig. 6.3: Date Life Cycle

6.4 VALUE AND COST OF INFORMATION

The value of information is measured in terms of benefits to the organization. The

benefits may be tangible that can be easily quantified. For example, 5% increase in
sales is a tangible benefit, which corresponds to Rs. 50,000. If the cost of the
information that led to this additional profit is Rs. 20,000. Then the value of the
information is Rs. 30,000. Sometimes, the benefits may be intangible and cannot be
easily quantified. For instance, the information may help consumers to connect to a
company better. The employees may feel respected in an organization if more
information is shared with them. In both the cases, the attrition rate will decrease
and the corresponding benefit cannot be directly measured in terms of financial
benefit to the organization.

In fact, whenever an organization identifies an opportunity for using information to its

advantage, it develops an information system. However before developing the 5
Information Systems-I system, a cost/benefit analysis is done to figure out net benefit of the system. There
are many methods to assess value of information system, which is explained below.
1) Cost-benefit analysis
IT project and investments has to take its place in the queue for all too scarce cash
resources, and the rules for justifying are the same as for any other project
A more sophisticated argument is that, because the risks inherent in decision about IT
are higher, the expected ROI needs to higher before an investment can be justified.
Because of high sum, IT investment has a high potential to damage the organization.
A new product is equally risky.
But fundamentally, decision makers are less comfortable about IT because of their
ignorance of the issues and they lack faith in the estimates presented to them. The
main points:
• IT is high risk, high cost; at the same time IT has potential for substantial benefits
• Managers are not conversant with all aspects of the decision - due to rapid pace
of change of technology.
• There is no trusted track record of benefits of IT investments
• IT decision should be made by IT professionals in consultation with general
management of the organization
• IT investment should get integrated with organization’s strategy/processes
• An organization should start with simple and inexpensive systems, gain
experience and then move to better, more involved systems
• The systems being used by the competition may be used as a guideline.
Identification of IT Costs

IT cost is so hard to estimate that one may be off by 50% or more. One of reasons is
that the overheads are excessive. If one unit of money is invested in IT, 57 units will
be spent on human resources etc. The Table 6.1 gives the cost involved.

a) Direct Cost
Table 6.1: Cost Involved in IT

Environmental operating cost UPS

Hardware cost File server

Terminals
Backup devices
Network printer

Software cost Operating system

RDBMS
Networking software

Installation and configuration costs Network wiring,

In-house customizing time
Re-engineering business process

Overheads Electricity, air-conditioning, paper, toner

cartridges, disks, paper

Training cost Database software course

Maintenance cost Yearly service contract for hardware

6
Software upgrades, annual fee Information Systems
Economics
b) Indirect Human Costs

Indirect human cost is more significant than direct cost and it is very illusive in nature.
Following is the taxonomy of indirect human costs:
• Management Time
• Management effort and dedication
• Employee Training
• Management Resources
• Personnel Issues
• Cost of ownership
• Employee Time
• Employee Motivation
c) Indirect Organizational Costs
• Losses in productivity
• Organizational Productivity
• Strains on Organizational Resources
• Opportunity Cost and Risk
• Business Process Reengineering
• Covert Resistance
Identification of Benefits

The following are the potential benefits of an IT system. In an implementation, some

of the benefits may get realized and some may not get realized.
• Reduced Head Count
• Reduced manufacturing cost
• Reduced inventory cost
• Reduced down time
• Better quality control
• Additional new customers
• Increased sales from existing customers
• Better image of the Organization
• Higher employee morale
• Reduced attrition rate
• The ability to recruit better employees
This approach of doing cost-benefit analysis is known as Total Cost of Ownership
(TCO). The model attempts to include all costs including direct and indirect costs of
owing the information system. One can include non-business uses of a computer
system as a cost factor. This model gives you complete freedom to include any
relevant cost or benefits. This model is versatile. It has been used to assess the net
benefits of owing a computer system. The model has been applied to information
systems as well. TCO, in many cases, has revealed weaknesses of an information
system in terms of under-utilization or mismanagement. There are some service
company who specialize in TCO analysis. 7
Information Systems-I Activity A
Pick an information system that you have used and do a cost-benefit analysis. Make
educated guess for cost and benefit figures.
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.............................................................................................................................

2) Return on Investment (ROI)

Another measure of IS value is return on investment (ROI). This method tries to

quantify additional profits that are generated as a percentage of the investment in
information system technology. For an example, a manufacturing firm invested 5 lakh
rupees in IS and an additional benefit due to increased sales is 50 thousand rupees,
then the return on investment is
50,000
–––––––– × 100 = 10%.
500,000
In other words, the return on investment is 10%. The company might perform this
analysis before installing the information system with an objective of determining the
utility of the system. The same analysis may be performed after the installation to
check the delivered benefits of the IS against expected benefits.
3) Earning Growth
Another measure of IS value is the increase in earnings growth. Let us say, an
organization experienced 6% sales growth in year 2000. After installing IS, the sales
growth became 11%. Assuming that no other factors affected sales, 5% increase in
the sales are due to information system.
4) Market Share
Similar to earning growth one can also evaluate value of IS in terms of increased
market share.
5) Customer Awareness and Satisfaction
Customer satisfaction is one of the most valued intangible benefits of an information
system. For instance, an information system may help customer track status of their
orders. Customer may check the stock status before he places an order. The
information may be available on-line or through an operation who has access to
information system of the company. There are many companies that conduct survey
on behalf of their client company’s to determine the satisfaction level of their
customers.

6.5 INFORMATION SYSTEMS: SUCCESS AND

FAILURE
An Information System is developed to assist management in problem specific
decision-making. An Information System development project has all features in
common with other software projects. The project may succeed or it may fail. A
project is a success if it is completed within time and budget. Moreover, it must meet
needs of its users and organization. Over a period of time, the following main success
and failure factors have been identified. There are many factors that contribute to
8 the success of a project

.
1) The project scope should be stable and well understood. If the scope of the Information Systems
project changes during the development of the software, the project is likely to Economics
suffer in terms of quality, schedule and budget overrun.

2) An MIS project that aims at re-engineering the business processes of an

organization faces major challenge. Such projects are high-risk but at the same
time have high potential for major benefits.

3) The technology development platform and development language exposure are

other critical factors. Sometimes, the technology may be new and the team may
have difficulty using the technology. The platform and language newness may
also create trouble for the team.

4) Support from the management is vital for the success of the project. If
management looses interest in the project, budget may be cut, key people may be
moved to another project or the moral support required by the team may become
non-existent.

5) The objective of MIS must be in tune with the objective of the organization. For
instance, objective of an organization is to cut cost. An MIS that aims to handle
financial transactions of the company is not in tune with the company’s objective.

6) The system should be user friendly and the response time should be reasonable
so that the user does not feel frustrated or over-powered by the system.

7) MIS should be developed with a clear objective that must be documented before
the development commences. The objective must be identified with the help of
all stakeholders. An analyst may have to interview concerned people to establish
their needs. He should consolidate the inputs and make a presentation in front of
stakeholders and the development team. This exercise may have to be repeated
till the objective becomes clear.

8) An important aspect of an MIS is data. Data policy such as what data will be
included, who will provide the data, who will validate the data, who will integrate
the data and how will the data retire should be clearly stated. These seemingly
trivial issues can turn a success into a failure.

9) A quality control plan must be in place to ensure quality of specification and

quality of conformance.

10) The concerned people should be adequately trained on the new system.

11) The system should be properly documented so that attrition does not affect the
project or MIS adversely.

6.6 SUMMARY

In this unit, you have been introduced to basic concept of data, information, and
knowledge. You have also learnt the growing need for information in the society. The
life cycle of data was introduced. The information has a cost and value associated
with it which was discussed in some detail. An information system depends on many
factors for its success. We discussed the main reasons for success and failure of an
MIS.

9
Information Systems-I
6.7 UNIT END EXERCISES

1) Define data and information. What is the difference between the two?
2) What is the need of information in present day society? Why is it necessary to
have a structure in an organization?
3) What are the main characteristics of information?
4) What are various ways of assessing the value of information? Explain each
method briefly?
5) Write a detailed note on data life cycle.
6) What are the main reasons for success and failure of an information system?

6.8 REFERENCES AND SUGGESTED FURTHER

READINGS

Davis, G.B., 1974. MIS Conceptual Foundations, Structure and Development,

McGraw Hill: New York.

Jawadekar, W.S. 1998, Management Information System, Tata McGraw Hill

Publishing Company Ltd.

Kanter, J., 1972. Management Oriented MIS, Prentice Hall Inc: Englewood-Cliffs.

Zani, W.S., 1973. “A blue print for MIS”, Harvard Business Review.

10
Information Systems
UNIT 7 MANAGEMENT INFORMATION Economics

AND CONTROL SYSTEMS

Structure
7.1 Introduction
7.2 Objectives
7.3 Systems View
7.4 Role of MIS at Various Management Levels
7.5 MIS as a Technique for Making Programmed Decisions
7.6 Decision-Assisting Information Systems
7.7 System Vulnerability and Abuse
7.8 Creating a Control Environment and Developing a Control Structure
7.9 Auditing Information System
7.10 Summary
7.11 Unit End Exercises
7.12 References and Suggested Further Readings

7.1 INTRODUCTION

Information processing is a major societal activity. It has become an important

resource in all walks of life today. Whether it is industry, commerce, defence,
banding, education, economics or politics, information is needed everywhere. A
significant part of an individual’s working and personal time is spent on recording,
searching for and absorbing information. As much as 70 to 80% time of a typical
executive is spent in processing and communicating information. Information is ‘live’
as it is required to be updated all the time, and it is renewable. Information is
substitutable and transportable and can be made to travel nearly at the speed of the
light in communication network. The growth of information in the last few decades
has been fantastic. It used to be said that information gets doubled every ten years.
But today this period of doubling seems to be just five years. The exponential growth
of information all around makes it necessary that information is probably collected,
stored and retrieved in various fields so that it could be usefully exploited whether and
when needed. In the previous unit, we have discussed in detail about certain concepts
in data and information. From information let us move on to management information.
What information does the manager need to manage effectively? We are interested
in a system for providing the necessary management information. Thus we need to
conceptualize a management information system (MIS). Before describing and
explaining each term, let us give a crude definition of sub-systems, which may be
composed of further sub-systems. We could carry on this refinement till we arrive at
the so-called ‘black box’ level, which is some perceptible manageable level. Just as a
system is made up of sub or sub-systems it itself is part of a super or supra system.
This could be termed as the environment in which the system operates. The forces in
the environment impinge on the system while the system itself exerts pressure
outwardly on the environment thereby having some sort of a dynamic equilibrium at
the boundary, which separates the environment from the system. We can graphically
depict the above narrative description in the form of Figure 7.1 definitions of MIS. It
is a system that aids management in making, and implementing decision. There is
quite a lot of disparity and lack of precisions in this regard as can computer based it
ought to focus on managerial effectiveness.

1
Information Systems-I
7.2 OBJECTIVES
After reading this unit, you should be able to:
• Explain the basic overview of the systems concept;
• Describe the management functions at various levels in the context of
relationships between management and informational needs;
• Apply the systems approach to analysis of organizational problems;
• Use MIS as a technique for making programmed decision;
• Describe the assistance of information systems for decision making;
• Explain the vulnerability of an information system; and
• Discuss the control and audit structure required for an information system.

7.3 SYSTEMS VIEW

A change that has occurred in recent years is the adoption of the so called ‘systems
approach’. In the past, managers, decision-makers and problem-solvers attempted
piecemeal solutions, thinking in an isolated compartmentalized fashion independent of
other operational units in the organization. Today besides professional managers,
political administrators have also become aware of the need for adopting an
integrated holistic perspective by adopting the systems approach to problem-
conceptualization and decision-implementation.
System concepts
Today we find everyone talking of systems—the transport system, educational
system, healthcare delivery system, defence system, economic system,
communication system, management information system, transaction processing
system, decision support system, computer systems, etc. we are in the midst of an
era of systems so to say. But what exactly do we mean by a system?
What is a system?
A system is an organized or complex whole. It is an entity; conceptual or physical,
which consists of interdependent parts or components. It is this interdependency
which consists of interdependent parts or components. It is this interdependency
which is characteristic of the parts of the system. It is an interlocking complex of
processes characterized by many reciprocal cause effect pathways. A system is a
complex of elements or components directly or indirectly related in a casual network.
This brings in the notion of some type of feedback and control to see whether or not
the system is a position to achieve the goals/purpose/objectives of the system. Any
system must have an objective or a set of objectives or a hierarchical set of
objectives. In a large context, a system is an assembly of procedures, processes,
methods, routines techniques etc. united by some form of regulated interaction to
form an organized whole. In fact no system, unless it be a totally closed system, can
exist in isolation.
A system is made up of sub-systems, which may be composed of further sub-
systems. We could carry on this refinement till we arrive at the so-called ‘black box’
level, which is some perceptible manageable level. Just as system is made up of sub
or sub-sub-system, it itself is part of a super or supra system. This could be termed as
the environment in which the system operates. The forces in the environment impinge
on the system while the system itself exerts pressure outwardly on the environment
thereby having some sort of a dynamic equilibrium at the boundary, which separates
the environment from the system.

2
Information Systems
Super or Supra System Economics

The System Other System

under consideration

Sub system - 1 Sub system - 2 S

Sub system
(SSS - 1) SSS - 2

Black
Box BB-1 BB - 2

Fig. 7.1 : Hierareby of Systems

Processor/
Set of
Transformer/
Inputs
Converter

(a)
Boundary Wall Environment

Input Output

Adjusted
Processor

Measured Output
Information (MOI)

MOI

Comparison Control
Effector
of MOI & STD Module

STD

Standard Norm/
Budget
Information 3
Fig. 7.2 : Basic Systems Module (b)
Information Systems-I We can graphically depict the above narrative description in the form of Figure 7.1
below. Let us give an illustration in the context of Figure 7.1. well, one could think of
an industrial system or a factory system. A factory system has various sub-systems
like the production sub-system, the financial sub-system, the marketing sub-system
and the personnel sub-system. Now a production sub-system could consist of sub-
sub-systems of production control, materials control, quality control etc. the materials
sub-sub-system can be further broken down into ‘black boxes’ say purchasing, stores,
transportation etc. In turn, the factory system is part of the larger economic system
of the country which would be the so-called superior or supra system.

Activity A
Think of at least three examples in the context of the Figure 7.1
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................

Further could you give yet another example in the context of Figure 7.2. Data could
be a set of input into a data processing, which would process/transform/convert the
data into output or information. One could think of raw material entering as input into
production system, which is converted/transformed or processed into an output i.e.
some final product.
Activity B
In the context of Figure 7.2, give at least three examples mentioning the inputs, the
processor, and the set outputs.

Input Processor Output

..............................................................................................................................
..............................................................................................................................
..............................................................................................................................

Top
Management

Policies Plans Budgets

Revenue Costs

Schedules Measur

Goods Services

Operating Man
4
Fig. 7.3: Interaction of Management Levels
Continuing the example further in the context of Figure 7.3 this time, the quality of the Information Systems
finished product could be measured by comparing it with the standard specifications Economics
of the finished product. Depending on the deviations or variances the manager can
then adjust the quality and quantity of the raw materials. The environment of the
factory system under consideration could be other factories, competitors, customers,
markets, socio-political and cultural factors, government etc.

7.4 ROLE OF MIS AT VARIOUS MANAGEMENT

LEVELS
Some say that management can be understood by observing what managers do.
Managers get the work done through others. Management can also be understood by
the type of functions a manager performs. A manager usually performs the following
functions: Planning, Organizing, Staffing, Directing, Coordination, Reporting and
Budgeting. In fact management is a process of achieving an organization’s goal and
objectives by judiciously making use of resources of men, material, machines, money,
methods, messages and moments (the last two in the context of information being
vital resources to the manager/decision-maker).
Management can also be seen as structured into three hierarchical levels namely, top
level, middle level and bottom level or strategic, tactical and operational levels,
respectively. Although lines of demarcation are not absolute and clear-cut, one can
usually distinguish certain layers within the organization, which are characterized by,
the classical pyramidical type of structures as shown in Figure 7.3. Top management
establishes the policies, plans and objectives of the company as well as a budget
framework under which the various departments will operate. These factors are
promulgated and passed down to middle management. They are translated into cost
or profit centre concept. These are reviewed, analyzed and modified in accordance
with the overall plans and policies until agreement is reached. Middle management
then issues the specific schedules and measurement yardsticks to the operational
management. The operational levels has the responsibility of producing goods and
services to meet the revenue, profit and other goals, which in turn will enable the
organization achieves its overall and objectives.

5
Fig. 7.4 : The Allocation of Managers' Time
Information Systems-I The hierarchical view of management is important for two reasons: information needs
tend to be different at different levels of management and the amount of time
devoted to any given function varies considerably with the level as can be seen in
Figure 7.4. The job content at various management levels is further elaborated in
Table 7.1.

In the context of MIS, management can perhaps be best defined as a process of

(i) selection of objectives, (ii) judicious allocation of resources (iii) determining
operational plans and schedules, (iv) keeping control of progress, and (v) evaluation
through feedback. Each of these areas requires certain decisions to be made.

Thus we take strategic decisions at the top level, tactical decisions at the middle and
operational decisions at the junior level. As can be seen from Table 7.1, the type of
problems and decisions at the junior level are quite deterministic and structured, so
we can have programmed decisions.
Table 7.1: Job Content of Management Levels

S.no Character Top Middle Operating

Management Management Management

1 Focus on Planning Heavy Moderate Minimum

2 Focus on Control Moderate Heavy Heavy

3 Time Frame 1-5 years Up to 1 year Day to Day

4 Scope of Activity Broad Entire functional area Single sub-function

5 Nature of Activity Relatively Moderately Highly

6 Level of Complexity Very Complex, Less complex, better Straightforward

many variables defined variables

7 Job Measurement Difficult Less Difficult Relatively Easy

8 Result of activity Plan, policies Implementation, End-product

and strategies schedules,
performance
yardsticks

9 Type of External Internal, reasonable Internal, historical

Information accuracy level of accuracy
utilized

10 Mental Attributes Creative Responsible, Efficient, effective

innovative persuasive,
administrative

11 Number of Few Moderate number Many

People Involved

12 Department/ Intra-division Intra-division, Intra-department

Divisional Inter dependent
interaction

Source: J.Kanters-”Management Information Systems”, Prentice Hall: Englewood Cliffs

But as we move to higher level, situations become fuzzy, ambiguous, and
unstructured, and thus we are faced with non-programmed decisions. We find that
with the introduction of computers, we have gone about routine EDP type of an
activity for the essentially programmed decisions that take place at the operating
level. Perhaps with the rapid advances that are taking place in the field of electronics,
communication and computers, we might have good progress in the field of AI
(Artificial Intelligence) and accordingly devise knowledge based expert systems
which would be helpful at the strategic level to cater to non-programmed complex
type of decision-making situations.
6
Through the classic pyramidical structure is generally acceptable; unfortunately in the Information Systems
modern complex organization this neat, militaristic, configuration seldom (!) fits the Economics
reality. Under conditions facing modern management the strategy and control tend to
become more remote from the resources that are geographically spread and
organizationally diverse. Between the decision-maker and the resources lie systems –
of people and data handling equipment –that can distort, delay, amplify, and dampen
messages. External to the enterprise, interest groups –in government, consumers, and
labor representatives, other national and international agencies are involved in an
information exchange. The modern manager must bed capable of managing his
information systems for strategic planning, management control, and operational
control.

7.5 MIS AS A TECHNIQUE FOR MAKING

PROGRAMMED DECISIONS

In unit 5, we studied Simon’s Model that divides decision-making into intelligence,

design and choice phase. In the intelligence phase, potential problems and
opportunities are identified. In the design phase, alternative solution to the problem is
developed. In the choice stage, a course of action is reflected.

In certain cases, the decision can be made using a rule, procedure or quantitative
method. Such problems are known as structured organization may decide to place a
purchase order for every purchase requisition without worrying about merging them.
Such decision can be programmed. An organization may have a fixed re-order point
and fixed re-order quantity irrespective of demand. Such decision can be easily
programmed. Automated system such as transaction processing systems and MIS
are often used to handle programmed decisions. There systems generate reports for
concerned people so that they can take action. In our examples a purchase order will
be generated for every requisition and a purchase order will be raised whenever the
inventory goes below specified limit.

7.6 DECISION ASSISTING INFORMATION

SYSTEMS

If the problem is unstructured, the solution cannot be arrived at using a set of rules of
procedures. The rules and procedures, at best, can help in identifying alternatives. An
information system that assists decision maker in making a non-programmed decision
is referred to as decision support system. A decision support system (DSS) usually
has large amount of data that is managed by a Database Management System. The
DSS presents various views of data to the decision maker to facilitate decision-
making.

The views and reports may present details according to the needs of the user. A user
may prefer graph whereas another user may like to see data in tabular form. A DSS
is designed to provide presentation flexibility to its users. Details can be rolled up or
drilled down depending on the requirement. For instance, sales manager of area A
would be interested in knowing total sales, details of each sub-area within his area.
He would also like to know sales in area B, area C etc. to measure his relative
performance. He would not be interested in details of sub-areas of area B as C; and
will down area A get complete details.

DSS should provide facility to its user to perform statistical analysis of data. The
sales data, for instance, can be analyzed for identifying seasonal fluctuations from
regular demand change. There are whole lots of software packages that can do 7
Information Systems-I amazingly good analysis of the data. Let us say, a company is considering an
investment in an IT Project. It can do a what-if-analysis to analyze worst and best
scenario. The expected cost and benefit can be changed within limits to estimate pay
back period.

These are situations when a closed form solution is not available. In such situation a
simulation model is constructed to gain insight. The model is tested on large number
of inputs. Sometimes, simulation is done to study the behavior of system over a period
of months in few days. A simulation system assists manager decision-making.

A decision support system may help a manager in perform goal-seeking analysis. In

goal seeking analysis, you work backward starting with goal to arrive at conditions
required to achieve that goal. For instance, you may allocate budget for inventory and
then backward to figure cut the stock level, re-order point, delivery time etc.

Ideally, one would like to have a DSS to help in decision making in every situation. So
far, no DSS has come close to being so general and useful at the same time. A DSS,
in practice, is developed for assisting in decision-making process for specific
problems.

7.7 SYSTEM VULNERABILITY AND ABUSE

Due to the potential of information systems, they are under constant attack from
intruders and hackers. Unauthorized access to data and programs may cost an
organization a fortune. For instance, an individual may disclose the stock levels of an
organization to a potential buyer who may decide to go to the competitor if he feels
that you may not be able to fill the order in time. In the world of e-Commerce, one
mistake could cost a client enough to justify a lawsuit. To avoid, abuse of information
system, proper controls must be set. There are many threats to information systems
such as hardware failure, software failure, user errors, program changes, theft of
data, services, equipment, and telecommunications problems.

Systems become vulnerable because of system complexity. Since computerized

procedures not always read or audited, this adds to susceptibility. Any disaster has an
extensive effect. System vulnerabilities differ from person to person.
• User: Identification, Authentication, and Subtle Software Modification
• Programmer: Disables Protective Features; Reveals Protective Measures
• Maintenance Staff: Disables Hardware Devices; Uses Stand-alone Utilities
• Operator: Doesn’t Notify Supervisor, Reveals Protective Measures

7.8 CREATING A CONTROL ENVIRONMENT AND

DEVELOPING A CONTROL STRUCTURE

We all know that prevention in better than cure. It is better to think of all possible
misuse and fraud from within the organization and establish system control to present
them. Such controls are reformed to as deterrence controls. We next discuss some of
these controls.
Input/output Controls
Input Control deal with entry of people who use the system as the data that is entered
in the system. People identification systems such as finger print identifier, retina

8
scanner, voice entry. A magnetic card reader is also becoming popular. Information Systems
Economics
The standard procedure such as well chosen passwords and different levels of
access are always put in place.

As far as data entry is concerned, the data forms may be used to validate data before
entry, identifying the person and date of data entry.

In the same manner, any output generated should leave an audit trail to identify any
misuse of the reports.

Processing, database and Telecommunication Controls the way input/output are

protected; same way the processing power of the organization must also be protected
from unauthorized use. The database management system provides mechanism to
give different level of access to different uses to protect data. With proper
configuration and use of encryption, the network misuse can be prevented.

7.9 AUDITING INFORMATION SYSTEM

An information system is like any other system in the organization. it must be audited
and reviewed to make sure that it is operating and being used as intended. The initial
requirements and objective document serves as a reference. The system is audited
for its performance, use, cost, benefit and other design criteria such as planned
activity for which resources are allocated and time frame is set. A planned review is
time-driven that may be done every 6 months or every year.

In case of a problem, a review may be alone which is refined to as event-driven

review. There problems provide opportunity to the organization to provide opportunity
to the organization to improve their systems.

The review must have a clear objective and reviewers must produce a written report.
The report must comment on the following factors:

Objective: Is in tune with the organizational goal?

Hardware/Software/Network/DBMS: Are there being used as intended? Will they

be able to meet requirement for next few years? Is there any bottleneck?

Staff: Is staff sufficient and sufficiently trained? Are People controllable using the
system?

Safety: Are enough controls present to ensure safety? Are the controls working
effectively?

Cost Benefit: This is one of the key reasons for taking up review activity. This is also
the most difficult part of the review process. The reviews should try to be as
objective as possible.

7.10 SUMMARY

In this unit, we have learnt the basic structure of an information system. We also
learnt the MIS as an organizational unit within an organization. MIS and its role at
various levels of management were also discussed. MIS is used for making
programmed decision as well as in assisting the decision making process. The
information system is vulnerable and it can easily be abused. An information system
requires a control structure and it needs regular audits 9
Information Systems-I
7.11 UNIT END EXERCISES
1) Discuss fully the purpose of an information system.
2) Discuss why management needs information. Is it possible for the management
of an organization to make effective decisions without the aid of an information
system? Discuss.

3) “In the end, the information system is recognized only as a foundation for human
judgment, insight and inventiveness”. Discuss.
4) What impact does the implementation of programmed decision-making have on
the management system of an organization?
5) Compare and contrast programmed decision-making information system and
decision assisting information system.
6) What are different types of controls and audits required for an information
system?

7.12 REFERENCES AND SUGGESTED FURTHER

READINGS

Davis, G.B., 1974. MIS Conceptual Foundations, Structure and Development,

McGraw Hill: New York.

Jawadekar, W.S. 1998, Management Information System, Tata McGraw Hill

Publishing Company Ltd.

Kanter, J., 1972. Management Oriented MIS, Prentice Hall Inc: Englewood-Cliffs.

Zani, W.S., 1973. “A blue print for MIS”, Harvard Business Review.

10
Information Systems
UNIT 8 INFORMATION SYSTEM SECURITY Economics

Structure
8.1 Introduction: Ethics in Information Society
8.2 Objectives
8.3 Information Rights, Privacy and Freedom in an Information Society
8.4 Protecting Computer Equipment and Files
8.5 Limiting Logical Access to Computer Systems
8.6 Disaster Recovery Plan
8.7 Computer Virus and Prevention
8.8 Summary
8.9 Unit End Exercises
8.10 References and Suggested Further Readings

8.1 INTRODUCTION: ETHICS IN INFORMATION

SOCIETY

Ethics determine generally accepted and encouraging activities within a company and
the larger society. Ethical computer users define acceptable practices more strictly
than just reframing from committing crimes. They consider the effects of their
activities including Internet usage, on other people and organizations. There are many
associations who have developed a code of ethics that provide useful guidance. The
association for computing Machinery (ACM) has developed a number of specific
professional responsibilities. These responsibilities include the following:
a) Access computing and communication resources only when authorized to do so.
b) Honor contracts, agreements and assigned responsibilities.
c) Give comprehensive and through evaluations of computer systems and their
impacts, including analysis of possible risks.
d) Accept and provide appropriate professional review.
e) Strive to achieve the highest quality, effectiveness and dignity in both the process
and products of professional work.
The above code of conduct for his deeds if a person accesses some data without
proper authorization, he held responsible. The person cannot say that data should
have been protected and get away with it. The information system and their impact
must be audited like other systems. Information system is like any other product and
the users must be aware of the risks involved. The unethical use of information
system can devastate an organization.

8.2 OBJECTIVES
After reading this unit, you should be able to:
• Describe ethical issues involved in information society;
• Discuss the right to privacy and freedom of information in society;
• Explain the need and mechanism to protect hardware and software from
unauthorized access;
• Recognize the importance of having a disaster recovery plan; and
• Measure the threat of virus and identify ways of preventing them
1
Information Systems-I
8.3 INFORMATION RIGHTS, PRIVACY AND
FREEDOM IN AN INFORMATION SOCIETY

Privacy is an important social issue involved in information society. Privacy deals with
the collection and use or misuse of data. Data is constantly being collected and stored
on each of us. This data is often distributed, sold or used without our knowledge. The
health care provider and retail shops have, for instance, forms of data on its clients
and customers. The fundamental question is “who owns this data and information?”
We know for sure that we would not like to share our medical records with others,
definitely not with insurance company or our employers.

The employer can use information technology to monitor the employees. The time
spent by an employee on computer can be recorded along with his activities. The
employer can use this data to estimate the number of breaks an employee takes. The
employer can easily monitor electronic communication in the form email. At the same
time, an employee can reveal company data to monitor employee’s emails. The
deleted emails can be retrieved and used as evidence if required.

Privacy of hardware and software consumers is another important issue. If hardware

companies give a unique identification to each major component, the software
company can use this number to uniquely identify each electronic documents created.
This could be useful in checking the piracy of users is compromised. Ethernet card is
the only hardware component that has unique identification, which is used in
communication. The Indian Constitution of 1950 doesn’t expressly recognize the right
to privacy. However, the Supreme Court first recognized in 1964 that there is a right
of privacy implicit in the constitution under Article 21, which states, “No person shall
be deprived established by law”.

8.4 PROTECTING COMPUTER EQUIPMENT AND

FILES

Crimes involving illegal system access and use of computer services are also a
concern. The systems left unattended over weekends without proper security have
been used for commercial use. Computer magazines regularly report cases where
employees have used the facilities for their personal benefit sometimes at the cost of
their employers.

Hackers make use of their computer knowledge to gain access to others computers.
Sometimes, files, passwords, programs, or processing power are stolen. An intruder
may alter the data or destroy the data making it unusable and useless. A hacker
writes a small password snifter that is hidden from the computer owner. A password
snifter can steal passwords and gain access to data and files. There are Antisniff
Programs that can detect and block a password snifter.

All types of computer systems and equipments have also been stolen from offices. In
one recent incident, all hardware components from the computer age were removed
and carried away, leaving the cage behind.

2
Information Systems
8.5 LIMITING LOGICAL ACCESS TO COMPUTER Economics

SYSTEMS

Personal efforts can reduce the risk of unauthorized access. You must protect your
computing facility in the same manner in which you protect valuables. You must
follow safety and security policies of your organization. For instances, you may be
advised to change your password frequently and choose password carefully. In case
your organization does not have a written policy, it is time to create written computer
security policy. In case, an incidence takes place, treat it the way you would treat any
other theft. Inform the authorities, document the incidence as accurately as you can,
back up all you files and data immediately and keep them offline. You must secure
any evidence.

At corporate level, efforts to safeguard data and files include installation of

specialized hardware and software. For instance, data and information are encrypted
to prevent unauthorized use. Use of biometric is also becoming popular to authorize
employees. There was one time when criminals were identified using fingerprints.
The fingerprint identification has been extended to identify authorized users. Iris and
retina scans which use to be part of science fiction movies has now become part of
sophisticated identification methods. The latest is use of magnetic card that is
checked by a magnetic card reader to allow entry.

Depending on the nature of the computer crime that an organization anticipates, it

may adopt controls. The controls are expensive to implement and the organization
must evaluate the cost against the benefit. To summarize, here is a list of control
guidelines:

a) Install strong user authentication and encryption capabilities on your firewall.

b) Upgrade your software with the help of patches, which are developed by
vendors whenever a security gap is found in the software.
c) Guest logins are always misused. Any book on Microsoft products advises
against creating a guest login. Group accounts such as head-sales should also be
avoided. Such accounts become public very quickly and no body can be held
responsible. In one of the academic institute of India, head-department account
was lying dormant for some time. A hacker noticed and started using it for
surfing the net and providing access to others as well. He used 60 hours of
download time per day for a month. At the end of the month, data is regularly
checked when this got caught and the only solution was to de-activate the
account.
d) Remote-logins also create serious threat to security. This fact is so well accepted
that Linux does not permit super-user remote-login. There was a time when
system accepted login and then prompted for password. While you typed
password, a star will substitute each character. A person from a distance could
easily learn the login and number of characters in the password. Systems have
now changed and login-password is accepted together.
e) It is a good idea to have dedicated servers for applications that communicate
with outside world. Encourage people to have separate passwords for Intranet
and Internet if possible.
f) In certain cases, the law requires that audit trail must be on. A document once
created cannot be changed without leaving an audit trail. Most of the ERP
packages, for instance, leave audit trail. In case of a crime, the audit trail can be
of immense hel.
3
Information Systems-I
8.6 DISASTER RECOVERY PLAN
An information system performs key functions for an organization. It for some
reason, the system becomes non-functional for some time, the consequences may be
unacceptable. Organizations usually have a set of emergency procedures for critical
functions. In best scenario, the end user will not be able to discover the failure of
regular system. Generally, the switching to alternate mechanism and procedures is
not seamless and the switching causes certain level of inconvenience to the users.
For instance, a library may issue books recording them manually if the information
system becomes temporarily unavailable.

The main reasons for system failures include power failure, data corruption, disk
failure, network failure etc. Nature also plays its role sometimes in the form of a
fine, flood or earthquake. In addition, labour unrest or human errors may also render
system unusable.

One of first stops of disaster planning is to identify threats. Not all the threats listed
earlier will be a concern to an organization. After identifying the threats, appropriate
disaster recovery plans should be implemented. We discuss disaster recovery plans
next.
Hardware backup
In case of a natural disaster or due to technology failure, the hardware may become
unusable. There are companies and firms that provide disaster recovery services. A
company may provide a hot site that has an operational ready to use system. This is
an expensive option, as the system is kept up to date, usually in different seismic
zone. The next option is to maintain a cold site. A cold site provides the infrastructure
but not the processing power and data. In case of a problem, the backup system is
made operational.

Some companies provide data backup services. You can keep a copy of your data in
electronic farm.
Software Backup
Software programs are precious assets of an organization that must be protected. A
human error may delete a software package or a hardware failure may make it
inaccessible. A simple strategy is to make copies of software and keep them safely.
In addition, one may like to keep another copy of-site in a safe environment.

The least one should do is take regular backup. If the data is too large, incremental
backups can be taken or selected data may be backed up at regular intervals.

The smart strategy is to be in pro-active mode rather than reactive mode. It may be
less expensive to plan ahead to avoid possible down time than suffer losses.

8.7 COMPUTER VIRUS AND PREVENTION

A virus is a program that reproduces itself, usually without your permission or

knowledge. In general terms, they have an infection phase where they reproduce
widely and an attack phase where they do whatever damage they are programmed to
do (if any). There are a large number of virus types. Another way of looking at
viruses is to consider them to be programs written to create copies of them-selves.
These programs attach these copies onto host programs (infecting these programs).
When one of these hosts is executed, the virus code (which was attached to the host)
4
executes, and links copies of it-self to even more hosts. Many viruses do unpleasant Information Systems
things such as deleting files or changing random data on your disk, simulating typos or Economics
merely slowing your PC down; some viruses do less harmful things such as playing
music or creating messages or animation on your screen. Such activities steal system
resources.

Virus writers have to balance how and when their viruses infect against the possibility
of being detected. Therefore, the spread of an infection may not be immediate. Some
viruses infect other programs each time they are executed; other viruses infect only
upon a certain trigger. This trigger could be anything; a day or time, an external event
on your PC, a counter within the virus, etc. Virus writers want their programs to
spread as far as possible before anyone notices them. In order to avoid detection, a
virus will often take over system functions likely to spot it and use them to hide itself.
Such viruses are known as Stealth viruses. A virus may or may not save the original
of things it changes so using anti-virus software to handle viruses is always the safest
option.

Polymorphic viruses change themselves with each infection. There are even virus-
writing toolkits available to help make these viruses. These viruses are more difficult
to detect by scanning because each copy of the virus looks different than the other
copies.

Viruses often delay revealing their presence by launching their attack only after they
have had ample opportunity to spread. This means the attack could be delayed for
days, weeks, months, or even years after the initial infection.

The attack phase is optional; many viruses simply reproduce and have no trigger for
an attack phase. However, these viruses write themselves to the disk without your
permission to steal storage and CPU cycles. These viruses often damage the
programs or disks they infect. This is not an intentional act of the virus, but simply a
result of the fact that many viruses contain extremely poor quality code.

As an example, one of the most common past viruses “Stoned” is not intentionally
harmful. Unfortunately, the author did not anticipate the use of anything other than
360K floppy disks. The original virus tried to hide its own code in an area of 1.2MB
diskettes that resulted in corruption of the entire diskette. This bug was fixed in later
versions of the virus.

There are currently over 50,000 computer viruses and that number is growing rapidly.
Fortunately, only a small percentage of these are circulating widely. A virus’ name is
generally assigned by the first researcher to encounter the beast. The problem is that
multiple researchers may encounter a new virus in parallel, which often results in
multiple names.

However, viruses are only one way your data can be damaged. You must be
prepared for all threats; many of which are more likely to strike than viruses such as
disk failure due to hardware problem. There are many other threats to your programs
and data that are much more likely to harm you than viruses. A well-known anti-virus
researcher once said that you have more to fear from a cup of coffee (which may
spill) than from viruses. While the growth in number of viruses and introduction of the
Microsoft Word® macro viruses and Visual Basic Script worms now puts this
statement into question (even though you can avoid these by just not clicking on them
to open them!), it is still clear that there are many dangerous occurrences of data
corruption from causes other than from viruses.

So, does this mean that viruses are nothing to worry about? Emphatically, no! It just
means that it’s foolish to spend much money and time on addressing the threat of
viruses if you’ve done nothing about the other more likely threats to your files. 5
Information Systems-I Because viruses and worms are deliberately written to invade and possibly damage
your PC, they are the most difficult threat to guard against. It’s pretty easy to
understand the threat that disk failure represents and what to do about it (although
surprisingly few people even address this threat). The threat of viruses is much more
difficult to deal with. There are no “cures” for the virus problem. One just has to take
protective steps with anti-virus software and use some common sense when dealing
with unknown files.
Finding a virus on your system may not be easy; they often don’t cooperate. Using
anti-virus tools is important.

A virus may or may not present itself. Viruses attempt to spread before activating
whatever malicious activity they may have been programmed to deliver. So, viruses
will often try to hide themselves. Sometimes there are symptoms that can be
observed by a trained casual observer who knows what to look for.

Virus authors often place a wide variety of indicators into their viruses (e.g.,
messages, music, graphics displays). With DOS systems, the unaccounted for
reduction of the amount of RAM known of a computer is an important indicator of
presence of a virus. But, under Windows, there is no clear indicator like that. The
bottom line is that one must use anti-virus software to detect and fix most viruses.

Your main defense is to detect and identify specific virus attacks to your computer.
There are three methods in general use. Each has pros and cons. Often, a given anti-
virus software program will use some combination of the three techniques for
maximum possibility of detection; namely Scanning, Integrity checking and
Interception. We briefly look at scanning next.

Once a virus has been detected, it is possible to write scanning programs that look for
signature string, which is a characteristic of the virus. The writers of the scanner
extract identifying strings from the virus. The scanner uses these signature strings to
search memory, files, and system sectors. If the scanner finds a match, it announces
that it has found a virus. This obviously detects only known, pre-existing, viruses.
Many so-called “virus writers” create “new” viruses by modifying existing viruses.
This takes only a few minutes but creates what appears to be a new virus. It happens
all too often that these changes are simply to fool the scanners. Newer scanners
often employ several detection techniques in addition to signature recognition. Among
the most common of these is a form of code analysis. The scanner will actually
examine the code at various locations in an executable file and look for code
characteristic of a virus. A second possibility is that the scanner will set up a virtual
computer in RAM and actually test programs by running them in this virtual space
and observing what they do. These techniques are often lumped under the general
name “heuristic” scanning. Such scanners may also key off of code fragments that
appear similar to, but not exactly the same as, known viruses.

The major advantage of scanners is that they allow you to check programs before
they are executed. Scanners provide the easiest way to check new software for
known or suspected viruses. Since they have been aggressively marketed and since
they provide what appears to be a simple painless solution to viruses, scanners are
the most widely used anti-virus product.

If too many people depend solely upon scanners, newly created viruses will spread
totally unhindered causing considerable damage before the scanners catch up with
the viruses. An example of this was the attack by the Maltese Amoeba (Irish) virus in
the UK. This virus was not detected prior to its destructive activation on November
1, 1991. Prior to its attack, it had managed to spread quite widely and none of the
existing (mostly scanner-based) products detected this virus.

6
Another major drawback to scanners is that it’s dangerous to depend upon an old scanner. Information Systems
With the dramatic increase in the number of viruses appearing, it’s risky to depend upon Economics
anything other than the most current scanner. Even that scanner is necessarily a step
behind the latest crop of viruses since there’s a lot that has to happen before the scanner
is ready. The virus has to be detected somehow to begin with. Since the existing scanners
won’t detect the new virus, it will have some time to spread before someone detects it by
other means. The newly discovered virus must be sent to programmers to analyze and
extract a suitable signature string or detection algorithm. This must then be tested for false
positives on legitimate programs. The “string” must then be incorporated into the next
release of the virus scanner. The virus scanner or detection database must be distributed
to the customer. If you depend upon a scanner, be sure to get the latest version directly
from the maker. Despite the most extensive testing it is possible that a scanner will
present false alarms (i.e., indicate a file as infected when it really is not).
Another line of defense is continuing education.

8.8 SUMMARY

In this unit, we have learnt about ethical issues involved in information society. We also
discussed the right to privacy and freedom in information society. There is a need and
mechanism to protect hardware and software from unauthorized access. You must
understand the importance of having a disaster recovery plan and every organization
should plan against a possible disaster. We also discussed the threat of virus and ways of
preventing them.

8.9 UNIT END EXERCISES

1) Does an organization have a right to collect and share information without the
permission of person concerned? What are the ethical issues involved in information
society.
2) “Every component of a computer such as software, hardware and network should be
protected”. Justify!
3) Why should every organization have a disaster recovery plan to protect itself? What
are the main components of a disaster recovery plan?
4) Write a brief note on virus threat and a protection strategy.

8.10 REFERENCES AND SUGGESTED FURTHER

READINGS

Bishop Matt(2002), Computer Security: Art and Science, Addison-Wesley Pub Co; 1st
edition.

Pfleeger Charles P & Pfleeger Shari L., (2002), Security in Computing, third edition,
Prentice Hall PTR.

http://www.cknow.com/vtutor/vtintro.htm

7
-

UNIT 9 INFORMATION SYSTEMS AND

CTIONAL ARlEA APPLICATIONS
Structure

Introduction
0b.jectives
Infor~iiationfsom Data
Types of Information
Information in Managerial Functions
Information Source: Internet
Information Systems ill Management
System De\/elopment: A Strategic I.'l;~~ilii~~g
P~.ocess
Progra~nmedancl Non-P~.ogrammecIDecisio~is
Environmental a11dCompetitive Information S!'stem
Infol-mationSystems in Functional Arerts ancl Ilccision
9.1 1.1 Marlteting
9.1 1.2 Operations Mana,ilement
9.1 1.3 Financial Management . 1*

9.11.4 Human Resource Management

Summary
Unit End Exercises
References and Suggested Further Reacliligs

9.1 INTRODUCTION
The world is passing through an important era in wliicli k~iowledgeis co~isideredto be
a supreme source for all other activities. Well-appreciated strategic decisions are the
outco~iieof good knowledge. Acquirement of k~iowledgeat one point oftime and
coiiti~iuousupdating keeps ;perso~i fit for business survival in tlie competitive
environ~i~ent. Learning froni persdhal experience is one way of gaining k~iowledge.
But as we know. it takes lot of tinie and some times it niay become impracticable.
K~iowledgegained t h o ~ ~ otlier
g h s o ~ ~ r clike
e s educntio~i,interaction witli others and
otlier means is comparatively faster. Information enriches tlie k~iowledge.Role of
informati011and knowledge in managerial decision-making is inevitable ill nature. In
managerial fi~nctio~is, knowledge integrates the activities of different departments and
enables tlie decisioli maker to take riglit decisions. Fitrtlier i~~formation enriclies the
nianqgel-s about tlie latest sce~ia'~.io
on tlie vital areas of functional ~lianage~iient like
Finalice, Marketing, Hunian Resource arid Operatiolis, Inforniatio~iis not only tlie
fou~idationfor any business: it tilso plays tlie role of bricks ill builclilig up tlie busi~iess
decisio~is.The generation and dissi~iiiltltionot'information should be a co~itinuous
process ill tlie orga~iization.

i unit you will pet an overview of basic i~ifoniiationsystems with focus 011
111this
I fi~nctio~ial
areas, 'l'lie co~iiirigtwo i~liltswill den1 witli HR and M~rketing
i ' M~~ingeme~it
and Opertitio~ismid Financiiil Mr!ringc~ne~~t respectively,
,
I
Infi,~.rns
tion Systems - IT
I --.- .--
9.2 OBJECTIVES
After reading this unit: you should be able to:
@ Describe the importance of inforniation in managerial fi~~ictions:
@ Identifi the role of iilfoniiation:'
@ Identifi. and appreciate
. -
tlie basic infonliation s!.stcms.
@ Diagnose tllc situatio~lfor de~~clopmcnt of infonilation s!,stem: and
Attribute tlie role of i~~foniiation s!~stc~iisin fi~nctio~ial
rircns of maliagcmcnt.

9.3 INFORMATION FROM DATA

In siniple teniis. ilifor~iiatio~i
is defined as tllc processed for111of statistical data It 1s
i~iiporta~ltto note tliat i~lfoniiation2nd data arc different to connote. But the! arc
intcrrclatcd, Tlie raly dntn collected about an!. plicno~llcnonma!. be iiscd to iplcrntc
tlic required infor~i~atio~l
While processing the data for tlie information: one iiecds'to keep
tlie fo!lo\vilig i i mind.
0 Data sliould be accurate ,
Data should be rele~~ant
Data sliould be tinie sclisitive
Infoniiatioli processilig fro111the ran1data cat1 be represented as information fi~iincl.
Procurement of correct i~ifon~iation in right time is onc of thc importa~itaspects for
busi~iessdecisions. Having tlic riglit itifoniiatio~iin hand, business organization call be
proactive in its activities to tllasiliiize tlic business profits. Tlic follov ing schcli~ntic
chart i~idicatcsthe positioli of the infomintion among other relevant clinrnctcristics
like data. kilorvledge. and wisdom. .
LVistlorn

1
9.1: Position of the Infomation
Fig~rc

Thc classiticatio~is l i o ~ ~belo\~.'portrnys

n tlie idea of generation of iiifor~nati~n
fro111
data. The different stages in tlie process could be statcd as:
Sumniarizing
I
" *. Data trimming /mining
0 Presentation and
II @ Indosi~~g
1 .--
Summarizing Information Systenis a n d ,
Fonctionnl Area Applications
.Data col lecred for want of information usually available in tlie form of questionnaire,
note. or the official unclassified formats. 'l'he first step towards the
analysis is bringing tlie data into tlie required for111of tables or arrays so that further
treaLment of data is possible. Grouping of the data under different category will
cnahle the analyst to identify a specific tool for analysis. 'rlie manual process of
summariziiig may leacl to the delay in tlie process. The computerized data processing
for summarizing tlie data through selected software espedites ;he process. For
e\amplc the sales data obtainccl from different sales ccnters may be required to
classiFy on the basis of various parameters lilce u~.ban,sub-urban, rural and other
bacl,ward areas to study in detail about tlie factors affecting the sales. The data
collected from an organization to understand tlie organizntio~isllbehavior towards the
employees welfare need to be classified on the basis of different categories of
employees.

@ Su~ntnnrisntion
0 Dntn Trimming
Pre3cnt:;tion

I
Irrclcvatit
Iirformiition
Fncts I
I lafornintion . &

i=]> Data base

Discard

lnvestiga te
Sources (Inside or
Outside the Net) ,

Figure 9.2: Data and Information

-. . .-+--.'.-""
I , . -. , * . . . . "--

,
Soul.ce: h//p '/vi.rioiic/i:vilr(~~~I,>
Data Trimming
Data trimming is the condensation or consolidation of statistical data for retrieving I

information. Tliere are specific statistical data reduction tools fortrimming the data.
Depending L I P O ~the
I nature ofthe data and tlie objectives of the study, tlle tools are
decided. I n practical situation we come across a huge volume of data for retrieval of
inforination and the application of co~nputersand the statistical software are used at a
large scale to draw conclusions. Suppose that the production department in a
man~~facturing company has the data on the number of units demanded i n a year, the
n111nher of times ordered, the quantity supplied etc., about its product. The company I
may be interested to find out various parameters associated with the productioi~like
tlie opti~numqiia~~tity to be produced, the lead time for the order etc., Wit11 the
application of statistical packages related to tl~einve~itoryproble~ns,it is possible to
derive tlle required information. I

Presen tntion
Tlie outcome of the data triniming is the uninterpreted statistical results. The results
obtained need to be related to the objectives for the meaningful representation. Tlie
process of depicting the statistical results in the desired form (charts, diagrams,
schematic representation etc.,) is called presentation. The presented results will
reveal tlie information in a better way. Information, as an object could be derived
from tlie presented results.
Indexing
Indexing or codification oftlie resil Its is required for fi~rtllerprocessing of information
like storage and retrieval, modification, converting into electronic mode for
commi~~iication etc., The codification is the base for presenting the information on
web pages. In the Internet searcll the codes are recognized by tlie computer at a
greater speed to retrieve them from the data dictionary or catalog. The big con-lpi~ter
databases are designed and used for data retrieval through proper indexing of the
data. p i 7 iraw
~ ~ data
~ collected from the field beconies infor~nationin the final forrn.
This has been depicted in a schematic representation given above.

TYPES OF INFORMATION
lnfor~nationretrieved from raw datacould be classified in different categories as:
1) Facts
2) Assumptions
3) Collateral i~ifor~nation
4) Fragmentary infor~natio~~
5) Irrelevant information
Facts are the accurate inforination. The infor~nationgenerated with the assumption of
~natliernaticalmodels is called reliable inforlnatio~iwithout any uncertainty. In some
statistical analysis certain amount of probability is used to predict the required results. !
Si~chinfor~liationmay not be 100% true. This type of information is called
informati011based OII assu~nptions.The other type of information is called collateral
and fragmentary infonnation. Tl~istype of i~ifor~nation cannot be directly retrieved but
is a parallel source of information. It is not considered to be highly reliable. Such
sources need to be investigated for acceptance.. ,

Before going illto details about fu~ictiolialarea applications of illformation, let us take
sonie situations that higliliglit the information requirement and its typology. The I

fol lowi~igare some of the managerial situations wliere the information requirement is
evident ill businesp situations.
-!
Table 9.1: Infornlation Requirelnent in Managerial Situations Information Systems and
Functional Area Applic :I t'Ions

Situation Data Availability Tools for Analysis

A manufacturing company. which is Sales Data Statistical Forecasting

. interested to decide about the number
of units to be produced in the next
month to meet the market dernand.

Financial institution wants to decide Financial repoi-tsl Internal rate of return

about the better optioiis available balance sheets of (IRR) and Yield to
Ibr the investment different companies maturity (YTM)

The personal department in an Data available with Replacemelit problems

organization, which is interested personnel department for personnel
in deciding about the n ~ ~ ~ n b e r recruitment.
of nlarlicting executives to be
recruited for the next quarter.

Service branch of a nationi~lized Yearly Data on the Waiting Line Models

bank would like to determine the number of customers
number of counters to be kept visit the bank during
open during the peak hours to different seasons
serve tlie customer with the most
satisfaction.

In each of tliese above situations tlie manager responsible for taking decisions
requires sufficient infortnation from the relevant records available with the
'
organization. Tlie term information means collectio~iof facts fro111which business
decisioris can be drawn. Facts and figures collected in this connection will enable tlie
company to go for a valid decision.

9.5 INFORMATlON IN MANAGERIAL FUNCTIONS

-
With tlie representation oi' Antony's structure, tlie data available at different '

fi~nctionalareas of management could be presented as follows:

Figure 9.3: Data Available at Different Functional Areas

I C

At operational level, organization gets in contact with public for i~iforlnatio~i I

r
procurement ancl dissemination. All types of inputs available from various so~ircesare i
gathered at tliis level. The routine office work like maintaining inward register,
2
maintainingof public relations, ~l~iderstatiding tlie exter~ialrequiretilent etc. are ~nostly 1
done at this level. T l i o ~ ~ g110h decision making process is carried out, proper
accumulation of data has to be done at this level for fl~rtherprocessing.
Hence it is suflicient to have a trained manpower that can act as per the computer-
assisted instnlctio~ls.At middle level of management, the input obtained fioin internal
and external sources of iufonnation will be processed for strategic decisioi~s.This
lcvel consists of ~lliddlclevel managers ~ 1 1 0can contribute significa~itlyfor the
de\fclopmentof organization. Different options available for each of the objectives
are evaluated carefiilly using the scientific tools of analysis and outconles are
reported. Thc role of middle level decision process is collsidered to be very crucial
beca~~se the output reccived froin this level is taken as input for tactical decision-
making. The highest'level in this hierarchy is the tactical decisions. This is the
decision-making group \vhich should ultimately be supported by the online
i~lfonnation.

To lligllligllt the infonllation needs of the organizatioi~;the sources are classified as

internal and external. We may co~lsiderthe followiilg classification to understaild the
types of elenle~~ts providing information in general for any organizatio~lirrespective of
its nat~11.e.

I I SBudgets
P ~ ~ Ii~nd

Sales FOI-ecituting
Labout-01-iented

c Cl;lssifici~ttion
F i y ~ r 9.4: of Info~mittiollNeeds

Educating the managers of the companies to understai~dthe inforination generation,

treatnlent of ~nfonnationand applicatiolls in real decisio~l-makingis very essential.
The task of iilfonliatioll gel~eration:process of i l ~ f o r ~ n a tmanagement
h~, of
infotllfation and timely cot~u~~unication or dissimilation is interrelated and hence a
systen~aticapproach is required. As the important a11d risky business decisions are
based on the available infomiation, adequate care should be taken to have tbe right
infon~~ation. P

The infonl~ationperspective in an orga~~ization is viewed categorically for managers

as well as for the organization. The managers use the informatioil as an object for
managerial decisions, as a co~~stnlct to build up the orga~lizatioiland tools to gain
explicit and tacit lulowledge. But for the point of view of the mat1agelnent, .
infonllation should be treated as a resource, as perception pattern for the
de\lelopmeilt, as a cotrullodity to be appreciated and as constituent force to meet the
internal and external changes.
/

i711c
llllks alllorlg tllc ~~crspccti\/cs
on infonnatio~i111an organization and as a manager Infortn;~tionSystems i111d
Functitrnr~lArea Applications
a1.c sho\ln belo\\,.

INFORMATION SOURCE : XNTEIWFT

In lllodenl days. Illtenlet is used as a base.for illfornlatioll rctriev. One can have
access to m y kind of infonnation alnounting to ally quantity throw I Internet. Most o
the biisiness enterprises have got their own web pages as it is being uscd lnainly to
pronlote the business. The advancelnent in co~lu~lunications and illfornlation
tcclinology made it feasible to use the computer to access any website for the
infonnation throug11 tlie search engines available. Search engines on the net have
indccd become an ullnlatchcd feedstock of infonnation. It has conle as a boon for
infort~~ation scekcrs. T I I C S ~ are two ways of finding infonnation on the net. Thcse are
tllc \vcb directories and search engines. While web-directories hold predefined list of
\\ebsitcs and are compilcd by human editors, search engines elnploy techlology that
basically looks througl~n database of indexed web sites and find the infonnation for
!oil. Thc search cngincs llnvc a huge database that is built up by the 'spiders' which
, arc nothing but prograllls that search the web for new pages. links on thc pages to
~nntclltlie indesed words \\lit11 tile URL of the page. The familiar soarc11 engines,
\ \ lllch are available on net for search, are google search, jal7tlo ~sea,ch,msn

.lst'c~r~h. .sffjl . I ' ~ o Y C ~nncl

, wehc/zlnin etc.

Intenlet conununication has becolne a global lnodc of co~municationfor most of the

activities of marketing. The collunu~licationor deal of business between the
custon?$rs and suppliers is done through the web sites, The prospective customers 11
I '
Infortnation Systems - If access the websites of the si~ppliercompany available on Web and browse tl~roi~gl~
the web pages for the info]-~iiationabout the product and submit the query or order
the product directly from the remote computer. The prospective customer-using Web
may surf different websites of tlie companies dealing in tlie same products and strilte
the best bargain not ~novingfrom his premises. The customer may make the payment
through credit card on the Internet for his purchases. The concept of doing business
transactions through Internet is called electronic commerce, wliich is gaining
familiarity nowadays.

Activity A
You are working in an FMCG company as a manager. Your company wants to
launch a new product. Search the web to fi~ldout tlie similar products by different
companies arid make a coniparative chart of the critical information that will help the
cause of your company.

9.7 INFORMATION SYSTEMS IN MANAGEMENT

Information t~andlin~in an organizatiolishould be a systematic process. Generally
systems are created to solve proble~ns.One can think of the systems approach as an
organized way of dealing with a proble~n.A collectio~iof components that work
together to realize some objective fonns a system. Basically there are three major
compone~itsin every syste~ii,rramely input, processing, and output.

Processing output .

In a system the different components are con~lectedwith each other and they are
intel-dependent. For example, Human body represents a complete natural system. We
are also bound by many national systems such as poIitical system, economic system,
educational system, and so forth. The objective of the system demand that some
output is produced as a result of processing the suitable inputs.
I

In business information processing system, it receives input as data and instructions,

process them under the defined instructions and gives output. The inputs to the
system [nay be from a data file, Internet source, or manual feed. Further the system
interacts with human or computers to support the operational and rna~mgerialdecision
makine:of an organization.
Tlie lnariagers sliould be we1 I aware of information systems because: Information Systerns and
Functional Area ~pplications
a The aniount to be spent on tlie information system should have positive effect on
profit making
e It increases business awareness, promotes biisitiess re-engineering and enables
total quality ~nanagernentto tlie managers
e lfthe managers are not acquainted witli tlie information systems, significant
amount will be wasted on automating ineffective process- or at tlie extreme,
companies call fail as a result of poor management.
The organization expands in the direction of information expansion. Flexibilities in
information handling lielp tlie managers to take advantage of all business opportunities
irrespective of small or large-scale enterprises. Some of tlie important i~iiplications
about the system development atid ~iianagernenton inforriiation are as follows:
1') Infortnation system wi I I contribute substantially to the managers in tlieir effective
decision-maki~igto achieve the organizational objectives;
2) Information system wi I I e~~ricli
the orga~iizationto meet the competitive
challenges;
3) Adequate knowledge from tlie past experience will lielp tlie Managers to
integrate tlie business strategy;
4) Information system will provide sufficient awareness about the external
components to react accordingly;
5) Information system is required to take right decisions in right time.
The effectiveness of information management can be ~iieasuredby the extent of
knowledge creation or innovation in organizations. 'The process approach to
information ~nanagernetitsupports !lie integration of business strategy and
informatioll. Some of the important implications about infor~nationmanagement
are as follows:
1) If information is coriceptualized as a process it can be integrated into strategy
fonnation
2) I~ifor~i~ation
management sliould account tlie infonnation as an object and as a
construct
3) It has a role in enhancing tlie infonnation capabilities of individuals in
organizations
4) Almost all managerial activities have an information component and'so
infol-niatio~imanagenient practice sliould be respolisive to the needs of managers
as information users and as infonnation producers or knowledge creators.
Tlie importance of inforniation in management is filrther empliasized by tlie fact that
much of management is primarily decisio~imaking. While there are several views of
what constitute management, the genel.ally accepted planning, organizing,
coordinating, directing, and control are all concerned with decision-making. Several '

filnctional areas of managenient viz, Persolinel, Marketing, Production, Finance and

Services will be significantly influenced by tlie information systems that are to be
impleme~itedin an orga~iizatio~i. Information once acquired need to be communicated
promptly to various clepat-tments as per tlieir requil.ement. The free exchange of
informatio~iill an organization is called information flow. Information flow integrates
various levels of management discussed earlier. Operatic!:ol decisions deals with a
large volume of interrial data. The middle management :i ioncerned witli medium
1.ange or tactical decisions requil.ed for ~nucliless inforriiation. The top management
being concerned with long tertii or strategic decisions requires for just a few vital
internal infortilation but a lot of extertial inforniation. Tlie successfuI infortnation system
sl~ouldtake itit0 acco~llitS U C a~ pattern of information needs by tlie management.
LzI
/
Information System

a - A Decision

(Stratagical)
pl e v l a

Transaction
Middle level pro.cessing
(Tactical)

/ Bottom level
(Operalional)
\
Onice
automalion

Figul-e9.6: The Infolmr~tionSystems and Management Levels

Typical exalnple of the three levels of information among the hnctional areas of
illanageil~eiltcan be represented wit11 the help of a pyramid structure as follow$:
All the four major areas of management are inter-related. Creating a master
r l ~ l t ~ h ~ rl ncaen n r ; c i n n nf tl-P o r t ; x ~ ; t i e c n f t h c r n r c t g n ; ~ c l + ; r r , t ; r r a c n p ~ t ; ~ , prtf tl-,= cnp~;fir

to
area, it is possible retrieve the data for any Lrther informahon. This kind of
approach is called integrated data approach and the development of system is called
integrated system. The master database created here should be flexible to have the
following features:
I) Distribute and share the data on network,
2) Nonnalized to accept che unique characteristics,
3) Capable of automatic updating,
4) Quick query.
The followiilg diagram depicts the creation of centralized database for application to
various fwnctional areas of management.

Financial Plan
Cost & Asset

Accounts Received

Inven t o ~ yCosting
Cnpncity Planning
Joh-pe~~fu~mnncc
Requirement Plnn

1 -I
Pipre 9.7: Creation of Centldized Database for Various Functional Areas Application
A typical example of role o f information systems for the iniportat~tareas of functional Information Systems ~ n t l
~hanagenientat different level of decisio~i-makingis shown below: Functional Area Applications

Table 9.2: A 'Qpical Example of Role of Information Systems

Production -
Finance -
Personnel -
Marketing
Strategic New Plant Alternative Welfare Competitor
Location Financing Policy Survey
Tactical , Production Variance Performance Advertising
Bottleneck Analysis Appraisal
Operational Daily Payroll Leave Sales
Scheduling. Records Analysis

9.8 SYSTEM DEVELOPMENT:

A STTCATEGIC PLANNING PROCESS
Development o f an infor~nationsystem requires adequate planning. T h e purpose of
system development needs to be analyzed and understood. As it involves cost
component, feasibility of the system development need to be discussed at a length.
The planning process consists of strategic planning which provides general guidance
on long-term ob-jectives and operating plans dea,!s with short-term objectives. Each of
tlie business orgaliization is expected to have its ow11 planning process. The 11 ierarchy
oftlie steps for strategic planning for the system developn~entis as follows:
Table 9.3: Strategic Planning for the System Development
-
Step Activity Implication
-
I initiation Begins when a sponsor identifies a need or an opportunity,
Concept Proposal is created.
System Concept Defines the scope or boundary of the concept. Includes
Development Systems Boundary Document, Cost Benefit Analysis, Risk
Managetnellt Plan and Feasibility Study.
Planning Planning: Develops a Project Management Plat1 and other
planning documents. Provides the basis for acquiring the
resources needed to achieve a solution.
4 Requirement Analysis Analyzes user needs and develops user requirenienrs,
1 / creates a detailed Functional ~ e ~ u i ~ . e m e n t s ~ o c u m e n t . 1

6 1 Development I
System Design ~ocument.Focuses on how to deliver tlie
rea uired functionalitv.
Converts a design into a complete information system.
II
1 I lncludes acquiring and installing systerns environment: I
creating and testing databaseslprepari~lgtest case
proczdures: preparing test files: coding, colnpiling, refining
I I programs; performing test readiness review and procurement I
1 activities.
7 lntegration and Test Demonstrates that the devcloped system conforlns to
requirements as specified in the Functional Requirements
Document. Conductcd by the Quality Assurance staff and
users. Produces Test Analysis Reports.
8 Implementation Includes ilnplementation preparation, implementation ofthe
system into a production environment, and resolution of
'
problems identified in the lntegration and Test Phase.
9 Operational Describes tasks to operate and maintain information
Maintenance systems in a praductian environment, Includes Post-
l~nplementationand In-Process Reviews.
10 Disposition . Describes end-of-system activities. Emphasis is given to
, I proper preservation of data
SOUI'C~:
h l l l ~ : / / i ~z~~doj..q(l\:
~~~i(!
~nforrnationSystems - 11 In short tlie tasks pertaining to design isjistenl consists of defining the problem,
understanding the management objectives, identifying the system constraints,
understanding the need for information, searching for alternative designs and finally
docutnentingtheconcept. The following schematic presentation depicts the typical
planning process of a systeln development.

i
Figure 9.8: Qpical Planning Process ofsystem Development

Systertr life Cycle

System development life cycle means combination of various activities. In other @
words we can say that various activities put together are referred as systeln
develop~nentlife cycle. In the System Analysis and Design terlninology, the system
deveIopment life cycle means software development life cycle.
Following are the different pllases of software development cycle:
System study
Feasibility study
System analysis
System design
Coding
Testing
Implementation
Maintenance
life cycle is shown in the following
The different phases of software develop~nel~t
Figure.

77
Maintenance
systemstudy
Feasibility Study
t
implementation
4
System Analysis
t
Testing
Development
Life Cycle
4
System Design

IG
Coding
2
Figure 9.9: Different Phases of Software Dcveloplnent Lifc Cgclu
lnformrtion Systems and
PROGRAMMED AND NON-PROGRAMMED Functional Area Applications

Managerial decisiolis are classified into programmed and lion-programmed

categories. There are some sit~latiorlsin which tlie analytical methods of decision-
l?lakingis possible and some other situations one need to apply the intuitive methods
of decision-making. Programmed decisio~lsare those tliat can easily be automated,
like tlie determination of optimal product ]nix, mini~numcost production scliedule,
opti~nalsequencing of ~nachinesto miniinize meal1 flow time ztc. Generally large data
and a few decision rules or algoritllms that use tlie data in an automated fasliioli to
arrive at an optimal plan cliaracterize such decisions. Techniques of Operations
Researcl~like Linear Programmilig represent a typical example of this category of
decisiolis Illat use formal data and algorithms. Naturally such decisions are easily
programmed. In other words they can be representecl as an algoritlilliic procedure
into u n a ~ n b i g ~ ~i~lstructions
o~ls wliose step- by-step execution will lead the optinial
result. Since these algorithms are likely to be codified in tlie forin of a computer
program and ruli on a digital co~nputel;they are programmable or programmed
decisions. Tlie key to such progranlmability is the ~~nclerlying stnlcture of these
decision situations that permit an algorithmic translation. Many oftlie prograliimed
decisions nlay need tlie most cllallenging algorith~nsinvolving tlie best brains available
at that lnolnellt for tlieir solutio~~.
Nevertheless they are trallslatable into algorithmic
procedrlres. Simon's predictions ofthe fifties llnve practically collie true in tlie
nineties. This is borne out by the large n ~ ~ l r ~ofb edecision
r support systelns that use
data and models to automate sucli decisio~ls- reorder levels in materials and
production control, control limits for process re-setting etc, Information support for
sucll programnied decisiolis can t)e designed ratlier easily.

Non-prograln~neddecisions 011the other hand do not lend themselves to eas),

aotomation. Tlie moclel support for such programmed decisions would need Inore of
heuristics rather than optimal algoritlims. Opti~nizatiollAlgorithms as mentioned '
earliel: are formalized procedures readily implemented as a finitely terminating,
computer programs with gualmteed outcome of optimal sol~ltions,whenever they
exist, Heuristics, on the contr~r>; gellerally yield near optimal if not thc opti~iial ,
solution but cannot guarantee optiniality. The lieuristics tliernselves may be
implemented in tlie form of a11algorithmic procedure and solved on a computer;
however the decisiotl situation may not have admitted any optillinl algoritlim, The
interesting developments in complesity tlicory of the theoretical colnp~lterscience
also led to an intel.estitlgobservation tliat for many interesting optimization proble~ns,
heuristics are necessary as no optimizatio~isalgoritlinis with reasonable estimates of
computational perfol.mancc are known to exist. Tliis idea led to the heuristic problem
solvi~lgapproach wltere one gets good sol~~tions arid even optimill solutiolis but
optimalits cannot be g~laranteed.Such heuristic procedures Tor tlie sol~ltionof lnariy
real-world problems in the area of sclied~llingand resource allocatioli have bee11
found to be extremely successfi~l.

Over tlie years tlie 13rogra1n1iiedand non-programmed decisions have also been
known as structured and unstructured tlecisions. While designing, information
systems one slio~~ld keep this vital difference between tlie two types of decisions in
mind Flexible access to data, user friencll iness, graphical Llser interSaces, natl~ral
lallgllage suppott, what-if ailalqsis, capability, etch.characterize information support
for non- programmed decisions.
.
ihkrnntk)or Byst~tn!, I! Exaniple for Programmed Decisions: Consider tlie problem faced frequently b) a '
small and ~~rediurn sized e~iterprises(SMEs) in deciding about the size to be ordered
lo ~nasinlizetlre profit 011 consumable items (nu~nber. o f 1111its
o f food packets). The I

sl~inll-scalee~lterprisei s doing tlie busiliess o f trading between the wliolcsaler and

ratnile~'.Tlte pllrcliase price per unit i s p, und tlie selling price is p, where p, p, .
'I'he unsold itern for the seasonlhr the day will make a loss to tlie dealer and hence
tile dea!cr will be able to retul-nit a t the lower price p,(p, > p,) . The objective is to
cicc ide about the number o f units to be ordered to maximize the profit. The intuitive
i~pproachto this problem will lead to problem specific and callnot be conceptualized.
I1 is better to think of using stnrctured analysis or a~lalyticalapproacl~.Assutne that
I
I
I
tliu 111ssnberof units dernapded is D and tlie quantity ordered i s Q. Tlie logical flow of
this approach is
\

Get I)and Q
I
-

I
I

.
I
')"his is celled conccptuulization o f tile problem. Once tlie problem is conceptualized,
\t.c..ctlt~give the mathematical fitnctian to tlie problem,

'I'kc rtlatherniltical folmhlatio~~

to filld the profit to this problem with tlie above.
is:
~~olations

-.
nroclel defined above coc~ldbe wed for any available quantities o f D and Q.
.']'he
.
1 lic advantages o f this n~odelarc:
'
I) Tlie system is open to arlyorlc in tlie organi;rnt~onfor applicatron
2) Instrlnta~leousn ~ i daccurate ci~lculatianis pvssible
3) Entrblcs co~~ip~rterizntion
oi'tlie system
4) k'lcsiblc Sir rev icn~lmodification.
I

'I'his kind o f approucll is callecl syste~naricapproach or programmable decisions,

\ v I i i c ; l ~is thc base fur the system develop~iicritfor retrieval o f information,

Iisnmple for Null-programrncd D~cisioas

Illana&e~*s are quite efficieut to 11iaLebetter decisions as they have got a great deal of
c.\periencs, Sollie timcs decisions ]iced to be take11ill tlie light of tlie situations and
111.1 in general. Tlie persons who are ill tlie field for quite some time will ~l~iderstatld
v t i \ i I y n ~ ~the
c l ~ I c c i ~ ican i taken accordi~lgly,For exariiple, to comn~issiona
o ~ hc
~~cnc.i. plan\. ronrlucting an in llause survc) about rhc p ~ spt e r ~ o r ~ ~ ~the a ~plnrlt
i ~ Eis.~ ~ f
41lI'~~l~i~111
10 ~l,;iiri ; I ~ ~ L \ C I L iI ~ ~i l~iS) l ~ ~ ~ ~
- ! It ~ ~ of
i oS goi11g
i~ C I ~:enc~~alizecl~sti~dy.
O Cfo1vn1
IS
:[II non-programmeddecisions, the conclusio~~s
could be arrived through the following, Information Systems and
P
Functional Area Applications
, simple steps (Dewey):

1) Identify tlie problem

2) Identify the alternatives
3) Select the best alternative
1 .

Though tlie programmed decisions are considered to be more accurate, tliere are
some situations in which the assumptions made under this category cannot be fully
practical and lielice tlie approacll of non-programmed decisions are used. If the
decision maker is we~l'ex~erienced, no doubt the accuracy could be maintained and
admit that tlie experience improves tlie problem solving,

9.10 ENVIRONMENTAL AND COMPETITIVE

INFORMATION SYSTEM

The informatio~isystem developed for business purposes should take into account all
tlie conditions,'which affect ihe business transactions. Usually the two major factors
I-esponsiblefor the business changes are the enviro~i~nental conditions (local and
global) and the co~iiparativefactors. Successful development of illfortnation systems
sli~~i~ldhave been based on tlie deep understanding of the organizatiatial structure and
dynamics of the enterprise also. For production department tlie assignment ofjobs to
~nachi~ies or machines to operators in a production eliviron~nentis very important. For.
a service organization like hospital itmay be a duty roster for nurses, doctors or other
paramedical staff: Such scl~edulesmust be detailed and unambiguo~isreports could
be produced in large number at relatively low cost. Most of the information contained , '
' in such reports is internal - to tlie special sliop or liospital. Some organization are
goal oriented, the analyst nus st be clear as to what information exactly need to be
collected, stored atid analyzed. Since every information must have acontext, only
operational inform,ationthat ulti~natelyhas some decision-making contribution must be
collected. Secondly, tlie information collected and processed must be co~isistentwitli
the level of tlie organization to wliicli it is to be presented. Organizations have not
only found out tlie i~n~riense utility of information systems to better Inallage tliejr
organizations but are also feeling the pote~itialof the competitive advantage provided
by, illformation as a resource. The classic example of ilre use of inforrnatio~ifor
conipetitive advantage is,SABRE Airline Reservation System of American Airlines
and tlie Frequent Filer Option introduced by Airlines tlie world'over. These are
esamples that illustrate tlie use of infor~nationnot just to run business effectively but
also to,open up new busi~iessvistas.

The payroll represents a typical operatio~ialsystem for tlie financial management.

Since such systems must execute accurately data pertaining to a large number of
staff in a timely manner, month after n~ontli,cost based efficiency and speed would
be a major consideration in tlie design of such a system.

Detailed Sales A~ialysisis a must for ally sales and marketing function. This might
i~ivolvea very detailed data collection and processing pertaining to every salesman,
every product over a loiig time span of an entire year or a quarter with even details
'of the region, market segment etc. Accuracy and timeliness of this effort would
decide the quality of tactical and strategic decisio~isthat may be based on summary
information generated out of this data. Accuracy and desegregation would be the
watcliword for such detailed data collectio~ieffort. ,
I
!
lnformrtion Systems - I1 Natt~rallyinformation systems milst have suln~naryinformation, with provision for I

detailed information to provide such information. Comparative analysis shift wise, t

I
plant-wise, machine-wise, operator-wise etc. may be necessary. The watch word
would be insiglit and analysis and not Inere reporting of data Variance Analysis for
the finance function would call for systems tliat point out deficiencies, cost over runs,
budget excess by careft~llymatching goal or target information with summary
information generated by operational data. Once again the accuracy is important; but
what is Inore important is tlie clear recognition ancl liighligliting of patterns that can
IieIp tlie decision maker to initiate action and bring systems under control. Timeliness
is a must, as tlie systems must be reset before it is too late.

A tactical system under personnel fu~ictionis tlie Performance Appraisal, which

would take into account among several other th ings, tlie individual employee leave
records. The details may not be that important but patterns are. Whenever they are
clearly visible. Certain poticy conformance may also be checked through sucli
analysis. Since decisions based on such systerns are likely to have ~nediumto Iong-
term impact, accuracy slioi~ldnot be i~nderestirnated,while keepingthe priorityof
analysis.

Advertising Information System is another examples of tactical information system

for tlie marketing function of management. Needless to say pla~iningfor
advertisement would use ~nucliof tlie infor~nationgenerated by detailed sales
analysis (an operational MIS system). But to be able to decide on tlie levels of
advertisement, !nix of advertisement, budget for advertisement etc., cal Is for I
'
certain policy parameters as well as environmental (outside organization) information.
This point must be clearly borne in mind in designing MIS for tactical decision
situations, I

A strategic decision by the production function oftlie management is a New Plant

Location, This would use m~~cli of the internal information generated by tlie tactical
system designed to analyze tlie production bottleneck that is internal to the
organization. But a long term decision like location of a new plant is likely to be , I
I
influenced far more by environmental information like changing market, changing
tecl?nology,cliangingfiscal and governmental policy like deregulation, tax incentive I
for backward area etc. Obviously strategic information systems should liave a II
meclianis~nof scanning and assimilatingenvironnie~italinformation that are lilcely to I

infJuencestrategic decisions in a systematic way. For tlie finance discipline, 1

altcr~iativeFinancing is a strategic decision. It will use a summary status information
about tlie internal finances of the company i~~cludingpayroll, budget, overruns,
I
variance analysis etc. but will be primarily governed by lor~gterm policy, business
environment etc. that are strategically important to tlie survival and growth of the
organization. Information support for sucli strategic decision would call for sulxtantial
external information supplemented with internal financial Iiealtll indicators. L)er:isiu~i
concerning welfare policy of an organization is a strategic decision that,mi~stbe faced I
b y personnel (also kuown as human resource development) management. It will be I
tempered by internal information about staff size, tlieir quality, and tlie compensation
I
package etc. but tlie strategic decisio~i,willbe governed by tlie future vision for the
organization as seen by tlie top management as well as t:he labor marltet conditions of
the environment. Beirig a long-term decisioli with major impact on tlie corporate
health of the organization this strategic decisio~ineed to be supported by a halance
blend of extertial and internal infor~liatio~i. While we taka primarily tlie decision-
making role of tlie management in tlie design of the information systems, care ~tiust
be taken to take iiito account tlie stark realities of ~nanagerialwork-style. The
diversity of managel.ial work, tlie interpersotlal dynamics; politics of people,
resista~~ce to change,,etc. nus st also be taken illto account. These are i s s ~ ~ beyond
es
the
.. - scope of this text but must be taken into account in tlie actual implementation.
' A strategic decision for the ~narketingfunction is a survey of competition and the lnformntio~~
Systems and
I-esultingstrategy of gaining market share. While a detailed alialysis of ill-colnpaliy F"nctionn' A~~licntions
sales and advertising is a Ilecessary prerequisite, much will depend on the present and
f~ltllrestrategies of tlie colnpetitors who are external to the environment. Once again
t1li.s brings to the focus tlie importa~lceof external factors for strategic decision.
policy likes del-egulation, tax incentive for backwarcl area etc. Obvio~lslystrategic
information systems should have a mecliallism of scanning and assilnilating I

environmental information that are likely to influence strategic decisions in a

systematic way.

9.11 INFORMATION SYSTEMS IN FUNCTIONAL

AREAS AND DECISION-MAI(I[NG

Let LISdiscilss some of tlie infortnation systenis in functional areas and their
contribution to decision-making.

9.11.1 Marketing
The term marketing as per the American Marketing Association (AMA)
is defined as follows:
The process oT:
@ Planning and executing the conception,
' @ Pricing,
@ Promotion and
Distribution of ideas, goods, and services to create exclianges tliat satisfy
inclivid~laland organizational objectives.

Marketingfilnction facilitates tlie activities mostly related to

@ Forecasting and sales planning:
@ Market researell
@ Advertising
Operation and control of infolmation required for market

The management of information, whicli provides o~ltp~lt to the above-specif ed

activities. is one of the important aspects in the business. 'l'o f~~lfill the ob.jectives of
the marketing, periodic tasks pertaining to collectio~iof data, analysis and
presentation in tlie form ofrequired reports need to be performed. The integrated
approacli comprising the data'input, generation of mat-lceting inForliiation and supply
of oiltpiit i l l the requit-ecl fol.mat is called rnarlceting information system. It consists of
people. equipment, and p r o c e d ~ ~to~gatlier,
~ e sort, analyze, evaluate, and distribute
timely, and accurate infol.niation to decision-malting. Marketing information system
are expected to help the ~iianagementin decision processing for pricing the product,
packaging, new product development, prodilct mix analysis, advertisiug, product
~~romotion policy. sales strategy. invento~ycontrol and production schedule. The clata
available at one place coulcl be used centrally for tlie retrieval of required info~*tnation
and information generated by one department coi~ldbe shared for otliers to prepare
t1ie.1-eports.
Information Systems - II 'I'he following table depicts the data availability, tools employed and output ex~ected
, - in marketing area.
I
Table9.4: Data Availability,Tools Employed, and Output Expected in Marketing Area
I
I
-
Data Available Tools Employed Output
Sales Forecasting Methods Expected Production
Advertisement Optimization Models Profit Maximization
Expenditure
Territorial Data Methods of Market Expansion
Market Penetration
Consumer Preference Brand Switching Tools . Market Segment
Price Comparative Analysis Pricing Strategy
Movement of Goods Inventory Tools ' Minimizing the Storage Cost

The develop~ne~it of marketing information system sl~ouldcoi~sistofvarious scb-

systems on marketing research, marketing planning, sales analysis and market
control. The inputs, processing, and outputs for tliese sub-systems are as follows:
Marketing Research:
Inputs
Based on external data collated from the industry primarily constituting sales
. performance a~ialysisof a variety of brands in various market segments of
various companies,
Industrial infrastructure, marketing, productiop strength and weakness,
Industrial advertising drive and impact,
Industrial pricing policy and consequences,
Ititer~ialdata compiled in the colilpany constitutii~gsales performance analysis of
various brands of tlie company in various market segments, i
&ategic marketing attribute and forecast data versus actual sales perforrna~ice
data,
Advertising budget and actual spending,
Infrastructure budgets,
'Prices of products and sales figure.

Outputs
Intensive reports on itidustry wide sales performances,
Inferences of results'c~rn~ared to forecasts with respect to past marketing
strategy, advertising and pricing
Review of marketing strategy, advertising and pricing policies, I

Market share of the company.

Marketing Planning:
, Inputs
0 Summarized data from market research.
Outputs .

0 Review of sales forecasts,

0 Product !nix strategic reports,
, 22 Market mix strategic reports.
I
$ales ~nal'ysis: Informrrtlars Syfiten~aalldl
Funcllaalal As@#Applif~arons
Inputs . I

e sales data by regio~i/product/perso~i~ieI

in terms of value and quantity, , I

Projected sales data by regio~i/product/perso~i~iel

for comparison with tlie actual
sales.
e Sales data customer wise with tlie transaction data for illvoicing system.

e Sales repoiats I-egio~i/product/pe~-so~i~iel

in terms of value and quantity,
~ariance'analysison actual sales versus projected sales,

Marketing Control
Inputs
Sales data of various products o f a co~iipahy,
Marketi~ipexpelise datn.
i ~
sales performance d ~ t personnel/
Sumniarized output sales a~ialysisco~istit~~ting a
repion/p~.oductwise.
/ , Sales tl-ansactiondata from i~ivoicingand sales systems.

Outputs
a * Variance analysis.
It

Age analysis,
'e Tactical reports on desirab'le a~id
undesirable trends.

Tlie typical transactio~iin tlie ~narketiligsub-system is depicted through the following

diagram: '

:I r
Compny
Database
MARKETINGSUESYSTEM

.+ Sales Forecast
Md&l
'*
Dab .a
Profit Plsn
Pertaining to
Sales Plan, . -++
@ Planning
Brand Switching
'
' M~lcriPla
Bills, Profit Porceptionei
Q Snlw Anslyslls
Plan etc. Analysis

-nr
. - -
't

Figure 9.10: g p i c a l Transfietioh in the ~ a r k i t l n g

P
sub-~yslrm

t
27
11
4

- L
Inft~~.rn;)tion
Systems - 11 To integrate tlie activities of marketing, sub-systems are broadly classified on thc
followi~igtypes:
1) Control systems
2) Planning systenls
3) Market research systems
4) Sales systems.
Activity B
Prepare a brief report on tlie niarket pla~~i~iiig
and sales ailalysis of a cornpan!, of
your choice. What are the benefits derived out of: computers and MIS.

9.11.2 operations Management

The area of management, which deals \vith the operational activities like prod~~ction.
project scheduling is called Operations Managanent. Thc important objectives of
operations malageineut are

@ Project scheduling
Tr,msportation costs nlininlization
@ Assignillent of jobs
@ Sequellciilg of jobs

The probleills ill opcratioils management are well stn~ctured.The tools of opcratio~is
research need to be comp~~terized for better results because of the followi~lgreasons.
Easily structured tllrougll ii~atlleinaticalmodel

e Nu~uericaloriented . .,
The integrated system approach could be shown through the followiilg schelnatic
representation.

d Orders Received
d Production Rules A
d Invoice Data
INPUTS d Shipping Note
d Sillcs Forecnst
D m A\~ilil:ihility OUTFJU'IS

PROCESSING Anticipiitetl Stoclis

@ Inventory
Paychecks
@ Price
ABC Ancllysis Purchase Orders
@ W i t ~ ~ h o uStocl;
se
Inventory Ul~ditte +. 0 Cash Position
Pending Orders ---)- 0
Shipment Routing
Routing and 0l)cmtions , Tribnsl)ortiltion
Joh Assignment Aclrno~vledgcme~it
Worlc in Progress f---.
Work Progress Analysis
Receipts
Output of PERTfCPM
Variance An;dysis
..

Outouts in the

24
Figulr: 9.11: The 1ntegl.itted System A j ) p r ~ i ~ ~ h
c.
Inventory Management lnfornlation Systems a n d
Functional Aren Applications
lliventory Management system allows you to
e Manage your stocks on a quantity and value basis
Plan, enter, and check ally goods lnove~nents
o Carry out physical inventory.
'The following are tlie important activities to be carried out for a better control over
the ~nanagementof inventory.

Managing Stocks by Quantity

in the Inventory Matlagelnetit system, the pliysical stocks reflect all transactions
resulting in a change in stock atid thus in updated invelitory levels. The user can
easily obtain an overview of the current stocks of any given material. For eacli
material, not only tlie stocks in tlie warehouse are sliown, but also the stocks ordered
but not yet delivered, reserved for production or for a customer, and tlie stocks in
qi~alityinspection can be ~nonitored.For example, If a fi~rtliersubdivisio~iby lots is
required for a malerial, one batcli per lot is possible. Tliese batches are then managcd
individually in tlie stock. Special stocks from tlie vendor or from tlie customer (for
example, consigli~nentstocks) are managed separately from your company's own
stock.

?Tanaging Stocks By Value

I'he stocks are managed not only on a quantity basis but also by value, a prerequisite
for cost accounting. With every goods movement, tlie following values are updated:
0 Tlie stock value for inventory management
@ Tlie account assignment for cost accounting
Tlie correspoliclilig GtL accounts for finalicial accounting via automatic account
assignment.
Both the quantity atid the value are updated automatically when entering a goods
movement.

Planning, Entry, and Proof of Goods Movements

Goods ~nove~ne~its include both "ext~rnal"~nove~nents (goods receipts fro111external
procurement, goods issued for sales orders) and "interlial" niovements (goods
receipts from production, witlidrawals of material for internal purposes, stock
transfers, and transfer pgstings). For each goods riiove~nenta document is created,
wliicli is used by tlie systelii to update quantities atid values atid serves as proof of
goods movemelits. Goods receipttissue slips are printed to facilitate physical
movements atid tlie lnonitorilig of tlie individual stocks in tlie warehouse.

Physical Inventory

Tlie adjusrment between tlie pliyslcal stocks and the book invetitories can be carried
out independently of tlie pliysical invelitory lnetliod selected. Tlie System supports tlie
following pliysical inventory methods:
0 Periodic inventory.
I~ivetitorysampling.
Q Cycle counting.
Information Systems - II 11ivoice Verification

Systern should be ~tiadeup of several cornpolients lii~kedtogether so that different

departments witllin a colnpany can cooperate with one another. The invoice
Verificatio~lcornpoilent is part of tlie Materials Management (MM) system.
It provides the link between the Materials Managetnent component and the Financial
Accounting, Controlling, and Asset Accoiinting components.

Illvoice Verification ill Materials Managetnent serves tlte following purposes:

6 -
'lt co~npletestlie materials procurement process which starts with the purchase
requisition, continues with purchasing and goods receipt and ends with the
invoice receipt,
* It allows invoices that do not origiliate in materials procurement (for example,
services, expenses, course costs, etc.) to be processed,
It allows credit mernos to be processed, either as invoice cancellations or
discounts.
Invoice Verification does not handle tlie payment or the analysis of invoices. The
infor~natio~i
required for these processes is passed on to ottter departments.

Invoice Verification tasks include:

* Eilterilig invoices and credit memos that have been received,
Claeckilrtg the accuracy of invoices with respect to contents, prices, and
arithmetic,
@ Executing the accoalllt postirlgs resulting from an invoice.
@ Updating certain data i n the sysrent, far example, open itelns and material prices,
@ Clleckit~ginvoices that were blocked because they varied too greatly from tile ,

purchase order.
Warehouse Management

Computer support of the orga~mizationand management of warehouses has become

imperative for efficierlt and effective processing of logistic requirements within a
company. Warelrouse Management (WM) systeni provides the flexible, eficient,
automwed support tliat enables you to:
@ Manage highly complex wanhouse stn~cturesand several different types of
warellausing facilities including auto~~iatic~aiehouses,custom-designed storage
areas, high rack storage, block storage, fixed bin storage and all other colnmonly
used storage areas,
6 Define and adapt a variety of storage bins for use in your specific warehousing
colnplex,
Process all relevant warehousing activities and movement tasks, such as goods
receipts, goods issues, i~lterrialand cxt~rna!stock transfers, automatic
replenisi~mentof fixed bills, material staging to production areas nnd stock
d iffererice handling,
@ Utilize ral~dornslotting for lnultiple owners ofgoocis,
Display summary evali~ationsof all goods movements in the warehouse,
6 laiiplement n variety of readily available put-away and picking strategies il~cluding
self-designed strategies,
@ Support the storage and retrieval of haztlrdous ~naterialsand all other goods that
require specid hitndlirig,
e Maintain LIP-to-the-minuteinventory records at tlie storage bin levei using real- I ~ ~ t o r ~ n a taysrclns
~on itlllt

Functioiial Area Applic~tions

time continuous inventory techniques,
o Support the use of automated barcode scanners and other technology for all
stoclc ~novements.
6 Intel-face to external warelio~~sing
systems,
o Fully integrate your Warehouse Management systeln for instantaneous
interaction with otli,er coniponents to include Materials Management (MM),
Inve~~tory Mariage~ne~it (1kI) Productiou Planning (PP), Quality Management
(QM) and Sales and Distribution (SD).
In addition to supporting tlie design of all typical storage areas, tlie WM system .

provides automated support for several advanced warehousing techniques, sucli as:
e and automatic assignment of goods to optimurn
The analysis of ~*zq\~ire~iients
locations in tlie warehouse ~ ~ s iput
~ i away
g strategies that can be easily defined to
match tlie characteristics of each storage area,
m Tlie configuration of areas for backorder staging and claoss-dockingof received
goods,
e 'The setup of "forward pick" areas and production s~lpplyareas with automatic
continuous repletlisliment from case or reserve storage wlieli a certain tliresliold
is reached.
Be~intii~ig with tlie planning phase, the WM systeln carries out stock availability
clieclcs ullencver trt~nsnctionsare iniliated in each of the respective systeln
components. Altliough it is possible to print material documents for each separate
transaction in the warehouse, tlie WM systeln facilitates automatic Row through
wareliousi~igtasks that are virt~~ally papel-less.

In tlie \Varehouse Management system, you create transfer orders bzsed on transfer
~~equirements. Transfer orders trigger and control the physical movement of goods
~litlii~ithe wa~.elio~~se.The WM systelii si~pportstlie processing of all relevant
riiovements. includi~lggoods receipts and goods issues initiated by the Inventory
Mariagernent (IM) system, deliveries from tlie Sales and Distribution (SD) system, as
well as movelnents that take place within the warehouse, such as internal stock
tra11sfer.s.With its illve~ltoryf~~nctions,tlie WM systelii clisures that boolc inventories
in tlie Inventory Ma~iage~iie~it systeln ln~tclitlie stock iu the ~~areliouse,at any time.
Because syste~iicomponents are fi~llyintegrated, you do not need separate interface
programs between tlie Inventory Management systeln and the Warehouse
Ma~iage~nent system.

INPUTS PROCESSIN C OUTPUTS

r PlantDsta 0 Updating lllventory Issue Slips

c Vnluation Datn 0 EOQ 4 Labels
r Storage Looatior~s 0 ABC Analysis J Route Sllps
rn Work Schedule 0 Goods Movement J Stock Report
r Goods Receipt 0 Stock Level 4 Order Status
r Goods lssue 0 Lead Time
0 De~nandForecast

+
Figure 9.12: The Activities and the Required Outputs for the Develop~nentof a System
.......,..
.. .... .,,.7.Ln,,J - II Y. 11.3 Financial Management

Financial accounting deals with collection, recording, arid evaluation offinancial data.
Bttsiness enterprise requires systelnatic maintenance of their records that help for
preparing the financial statenlents like Profit and Loss Accounts and Balance sheet.
Accotulting is considered as an information system because it has inputs of financial
data, processing by evaiuation and outputs through financial reports. The importance
of financial information system for the different users in the managerial area can be
depicted as:
-
Nature of Information Ultimate User

Cost planning and cost control of operations Management

Profitability ofthe finn
Strategic and tactical decisions
Profitability ofthe firm Shareholders and Investors
Soundness of the irivestment
Growth prospects ofthe firm
Liquidity ofthe firm Creditors
Profitability and financial soundness
Statement of salar~es,wages and bonus E~nployees
.- -- - -- - -- - -

Manag~ngthe industrial economy of the ~ivemrnent

country, collection of sales, excise and
other taxes
Financial growth of the firm Consumers and public
Social role ofthe firm in different sectors

To fillfill the needs offinancial illformation the itiformation system used in most ofthe
co~npaniesmay be classified as under:

I ) Financial Accounting Systems: To provide information to Government,

investors, and other parties in the form of
reports

2) Managetnent Accounting System: To provide reports to mangers for strategic

and tactic decisions

3) Cost Accounting System To provide informatioti about cost planning and

control operations to the managers

. ,

Figure 9.13: Financial Information System

The of implementing computerized financial accounting system include: Information Systems and
Functional Area Applications
Maintaining Account Books
e Preparation of Gelieral Ledger
r Generating Acco~~nts Receivable and Accounts Payable Statements
Generating profit & Loss Accou~~t and Bala~lceSheet
e Generating Updated Financial Data for other Systems.

laputs to the System

'rhe input data from the financial system are from:
@ Cash Voucliers
r Bank V~uchers
, a Sale Vouchers
r Purcllase Vouchers
@ Joyrlial Vauchers.

Outputs to the System

The outputs expected from the system are:
0 Account books like cash book, bank book sale book etc.
0 Trial Balance
Trading Account
@ Profit & Loss Accou~it
@ Balance Sheet
0 Accounts Receivable Statement
@ Account Payable Statement.
The Financial rnaliagerne~itis tlie nost importa~itaspect in inanagerial functions.
Managers quite often recluire the financial position of the organization for various
reasons like planning, monitoring, performance evalilation etc ofthe companies to
decide about further action. In traditional method of information retrieval different
kinds of books, ledgers and financial records have been kept to follow up the financial
position and by end of each month status used to be calculated. Computerization of
financial record not only simplifies tlie procedure but also is more accurate. With
comp~~terization on-line infortnation could be accessed. As most ofthe companies
have gone for the compi~te~.ized data record, creating a database with required entries
will facilitate the storage o informationand any kind of manipulation based on the
database. A few advanced applications in financial transactions are e-commerce, e-
business and on-line banking.

System development for financial management is not only to make the computerized
billing or providing the receipts for the transactions. The system integrates number of
financial transactions of the organization.

9.11.4 ~ u m a n
Resource Management
1-he manpower utilized in the organization is treated as a valued asset. Tlie
management of this asset is just like management of any other source in an
organizatio~l.Organizational, effectiveness and efficiency, growth of the business,
sustainability for the competitiveness can be seen through proper management of
hilman resources. HRD management emphasizes an optimum utilization of human
res9urces by formulating consiste~itand coherent policies aiined at promoting
Int'c~tmationSystems - II commitment to the organizatioil. Tile infbrmation system 011 HRD is restricted to
persolme1 managenlent systems whose role is to assist in:
8 Recnlitment,
Placement,
0 Training and development,

The vital area covering the above activities is called Humall Resource Plai~~ling.
HRD syste~nbinds fi~nctionsof personnel management systems with other fi~nctions
of organization such as marketing, finance, production, and inventory.

I
0 Recruitment
OUTPUTS
PROCESSING
Alterni~teSources

e Woi-kAn;llysis
* Cnst4)cnctit

Figure 9.14: HR Information System

9.12 SUMMARY
In this unit. an attempt has been made to explain the importance of information.
informatioil generation as a system and role of infonllation in various areas of
Eunctioilal ina~lagemei~t,We have discussed some of the key points (environmc~~tal
m ~ dcompetitive) to be kept in mind while going for the development of infontlatiol~
systems. Steps in the process have been discussed to familiarize the learners to
practice for the developillent of the business system for the given enviromiellt.

Soine of the areas left out are project, medical and health care, township, training: firc
service, and energy etc. lllese all have similar needs to build up from the basic iriputs
a good quality database each and then to evaluate selective data, analyzed data, int(?r-
.
linked data and aggregated data to derive suitable MIS support to decisionmaki~lgax
the corporate level,

30
Information Systems and
9.13 UNIT END EXERCISES Functional Area Appliiertians

1) Discuss tlie impo~tanceof i~ifor~natio~i

systeni for business decisiotis.

2) Disting~lislibetween data, ilifortnatioli and knowledge.

3) Explain the steps involved in tlie developnient of busitless systems.

4) Visit some of tlie 01-ganizationsto identify the information systems used for better
management. Suggest tlie ways and mealis for the improvement.

5 ) Identify arid rialne some of tlie computerized iliforrnatiorl systerns used in

pr~3ductionmanagement, HRD and marketing.

-
9.1 4 REFERENCES AND SUGGESTED FURTHER
READINGS
Clifton. 1-4. D.. 1986. Bu.sin~..ssDrr/aS"j'afenrs,Prentice-Hall: Englewood-Cliffs,

Murdick, and Thomas C. Fuller. "Subsysterns for MIS". Jouri~nlof Sy.~tems

Mo11ag~~117enl.
June 1979.

Murdick, Robert G. 1'141~C'onccpts

7: and Design. Eliglewood Cliffs, N.J.
P~.entice-Hall,1980

CS R (20021, M~~nugemenf
Pvtu~-tl~y fr~forn~ation Texl and Applicofion,~,
Sj/sten~,~:
Third Edition. Himalaya Publisliing House, Murnbai

Robert G. Murdick, Joel E. Ross and James R Claggett. Infunnation Syslems,for

Modern ~ n n a ~ e r n c nPrentice
t, Hall of India, 1997

Walker D. (1989), C,'unipufer Bused /1rforn7ation Systeti~s,Elsevier Science Pub Co;

2nd Edition.
Integrated Applications
UNIT 10 TRANSACTION PROCESSING
SYSTEMS-I: HUMAN RESOURCE
AND MARKETING MANAGEMENT
Structure
10.1 Introduction
10.2 Objecitves
10.3 Human Resource Management Sub-system
10.3.1 Recruitment
10.3.2 Retention/Service Conditions
10.3.3 Retirement
10.3.4 Advantages of Computerization
10.4 Marketing Management Sub-systems
10.4.1 Sales Management
10.4.2 Sales Forecasting
10.4.3 Advertising and Promotion, Information System
10.4.4 Market Research
10.5 Use of Computers in Marketing Management
10.6 Summary
10.7 Unit End Exercises
10.8 References and Suggested Further Readings

10.1 INTRODUCTION
Management information system, in general, consists of all business transactions of
the organization. Every information system has many subsystems like transaction
processing system, decision support system, office automation system etc., to have a
larger utility of database created for business analysis. Data stored in the form of
computer database need to be retrieved properly to satisfy the information
requirement of different operational areas of management. The decision makers do
retrieval of information from the master data through a set of well-defined tools. For
example, to calculate the net salary of an employee, we need to supply different
inputs like basic salary, number of days present, existing DA, and HRA levels.
Accounts department uses this information to calculate the final receivable salary of
an employee. This process is called transaction process of the data for payroll
calculation. As this is a part of the information system, it can be called as a
subsystem. Preparation of transaction documents such as pay slips, invoices, and
receipts is important and routine task performed in managerial functions. The general
view of transaction processing system is shown below:

Transa
Modu
Central
General Processing
Database
Transa
Modu Etc,

Output
Formats
1
Figure 10.1: General View of Transaction Processing System
Information Systems -toIIget the desired information through the specific tools of
Data manipulation
management is called transaction process. As applicable in other cases, different
areas of management like HRM, Finance, Operations, and Marketing have various
business data processing and hence the sub systems to generate required output are
needed.

10.2 OBJECTIVES
After reading this unit you should be able to:
• Describe the role of transaction processing system in managerial functions;
• Identify transaction modules in a subsystems;
• Integrate subsystems to get desired output;
• Discuss the subsystems in Human Resource Management;
• Explain the subsystems in Marketing; and
• Enumerate the advantages of computer oriented transaction processing.

10.3 HUMAN RESOURCE MANAGEMENT

SUB-SYSTEM
In Human Resource Management, the Personnel Manager has the responsibility of
executing multifarious activities pertaining to recruitment, training of the employees,
retirement benefits of the employees etc. Planning, executing, and controlling of these
activities about the existing employees is carried out by the personnel manager
through the information system called personnel information system developed for
this purpose. The personnel information system deals with the flow of information
about people working in the organization as well as future personnel needs. In most
of the organizations, the system is concerned primarily with five basic subsystems of
the personnel function: recruiting, placement, training, compensation, and
maintenance.

Let us discuss three of these subsystems separately:

1) Recruitment
2) Retention/Service Conditions
3) Retirement

Recruitment Human
Resource
Management

Retirement Output of the

Formats/
Results

Figure 10.2: Transaction Modules in Human Resource Management

2
10.3.1 Recruitment Integrated Applications

Role of personnel department starts with recruitment of personnel. If properly

managed, the recruitment system forecasts personnel needs and skills and recruits
the personnel at the proper time to meet organizational needs. Personnel department
on the basis of retirements/resignations either identifies requirements, or concerned
department sends requirement to personnel department. On the basis of the
requirements, personnel department initiates process of recruitment, which is divided
into the following steps:
• Finalizing the requirement for various posts • Interviews
• Publicity as per requirement • Final selection
• Receipt of application forms from candidates • Issuing appointment letters
• Initial screening
Development proper information system giving the necessary inputs for generation of
reports pertaining to the above cases lead to a subsystem for this purpose.

10.3.2 Retention/Service Conditions

This is an important aspect in the functioning of personnel department. Personnel
department maintains records of all the employees about the nature of the job,
department etc. The major activities undertaken and related data requirements here
are:
• Training/ Seminars/Refresher • Performance Reports
courses for employees • Salary/Compensation
• Job • Organizational Structure
• Promotion • Job Description
• Increments • Liaison
• Leave Accounting
Information on each of the areas is compiled from the master database created and
made available in the organization.

10.3.3 Retirement
Personnel department keeps track of retiring employees. It completes all the formali-
ties necessary and issues orders for providing retirement package through account
department. The calculation requires various inputs about the employees from the
personnel records.

There are other subsystems also like Compensation & Maintenance etc. Another
interesting subsystem could be Skills inventory program, which identifies and locate
the talent resources of the organization to maximize their use. The concept of “Skill
banks” or “manpower assessment program” is applied. This could be one of the
subsystems to develop and support the main system.

10.3.4 Advantages of Computerization

Consider an organization where there are more than one hundred employees. In such
an organization, the staff of personnel department has to do a lot of paperwork to
keep record of courses, seminars, previous experience etc. for all the employees. It is
a voluminous task. During the process of maintenance of individual records, leave
details, course appraisal reports etc. at least one folder per employee is maintained in
3
Information Systems
manual system. - II a large number of folders are opened for various welfare
Also,
activities. Personnel department also has to look after legal side i.e. implementation of
industrial rules and regulations, liaison with employee unions and follow civil suits in
courts etc. Thus a lot of data needs to be stored and number of files are opened and
used continuously. Also information on employees is sought very frequently for the
employees themselves as well as for other departments. Most of the time staff has to
search the information kept in different files under a number of enclosures.

On computerization of personnel management system, on-line data will be available

and outputs can be taken in desired formats. Queries can be put to get required
information. Thus a lot of time is saved which can be utilized effectively for additional
welfare activities for employees.

Further, the data pertaining to personnel information about the employees are
confidential in nature. In manual system there is always the possibility of unauthorized
access to these data. With the computer system, the access can be controlled through
the password and hence the confidentiality can be maintained.
Let us make a comprehensive list of uses of computers in HR area.
The main uses to which computers can be put in human resource departments are:
Keeping Records: Replacing card indexes and filing cabinets by compact discs.
Listings: Quickly providing listings of employees by department, occupation, grade,
pay level, length of service, age, sex, qualifications, skills, etc.
Automatic Letter Writing: Producing standard letters and forms for recruitment,
promotion, transfer, upgrading, appraisal, pay review and new contracts of
employment.
Manpower Planning: Using manpower data to forcecast the future demand and
supply of people. Manpower models can be used, for the following forecasting
model for examining a hierarchy of grades by age. Useful for gaining general
understanding of future movement of staff and changes in age/grade structure
Labour Turnover Analysis: Providing labour turnover statistics.
Career Development: As a development of manpower planning models, computer-
ised personnel information can be used to improve succession planning.
Recruitment: The computer can, in effect, be used as a filing cabinet to store details
of cash applicant, date of receipt of application, when called for interview and the
outcome. If an applicant contacts the company, he can be informed of the progress of
his application. Managers can be given details of the number of applicants and how
many have been interviewed, Lists and automatic letters can be produced when
calling for interview rejecting applicants or making offers.
Training: Records can be kept to check on who has received training or on progress
through other training schemes. Listings of skills and qualifications be department or
occupation can be produced to identify gaps and training needs.
Pay: Information can be drawn from both personnel and pay-roll systems to analyse
pay-roll costs and ratios and to assess the impact of various pay increase options on
the pay stucture and on total pay-roll costs. Budgetary control systems can be
computerised to show actual pay-roll costs against budget and project future costs.
Salary Administration: Salary analysis reports can be produced which give
information by employee on occupation, salary position in salary range, total
percentage increases over previous years and annual appraisal. Individual forms and
departmental schedules can be generated for salary reviews and analysis can be
4made of the salary structure (e.g. comparisons).
Job Evaluation: Data bases can be created to hold and process Integrated Applications
the information on
job evaluations, such as grades and point scores. Weightings of job evaluation factors
can be determined by multiple regression analysis and the recording and analysis can
be computerised. In a job evaluation exercise, the information system can be used to
point out the names of those whose jobs are to be evaluated. Details of job, grade,
function, location, sample size and current point ratings can be programmed in. The
data base can link together similar posts in different parts of the organisation. Listings
of all gradings, re-gradings and points/scored can be produced.
Absence and Sickness: Absence and sickness can be recorded by employee, with
reasons and analysis can be produced of absenteeism and sickness.
Health and Safety: Records can be maintained on accidents and absence due to
health hazards. Trends can be analysed and information produced on who has
worked in certain areas, or who has used certain processes and for how long.
Activity A
Critically evaluate the use of computers by your organization for Human Resource
Management decision-making.
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................

10.4 MARKETING MANAGEMENT SUB-SYSTEM

As we have seen in the previous unit, the business function of marketing deals with
different activities like planning, promotion, and sale of existing products and exploring
the market trend for the existing and new products. Information system specially
designed taking into account all these factors can only supply the required competitive
information for the benefit of customers and management.

Different categorical decision systems like strategic, tactical and operational

information help in the activities of the marketing managers in product planning,
pricing of the product, planning for advertising, sales promotion and expenditure,
forecasting market potential for new and existing product and deciding about the
distribution channel etc.

Control reporting systems support the efforts of marketing mangers to control the
efficiency and effectiveness of selling and distribution of products and services.
Analytical reports provide information on firm’s actual performance versus planned
marketing objectives.
The major marketing subsystems are:
• Sales Management
• Sales Forecasting
• Advertising and Promotion
• Marketing Research
5
Information Systems - II

Sales Sales
Management Forecasting

Adv. Market
Promotion Research

Figure 10.3: Transaction Modules in Marketing Area

10.4.1 Sales Management

Sales Management system provides information to help sales managers plan and
monitor the performance of the sales organization. In most firms, this system
produces sales analysis reports, which provide information analysis of:
a) Product sales trends,
b) Product profitability on a product-by-product basis,
c) The performance of each sales region and sales branch,
d) Sales persons performance.
To fully support the sales systems, invoices should contain information about product
type, product quantity, price discount terms, customer identity and type, sales region
and sales person.

The sales reports must contain information about the profitability of products, product
lines, sales territories, and individual salespersons. Profitability reporting requires
information about product administration and selling costs.

The sales analysis system also provides information used to evaluate the performance
of sales personnel. By reclassifying sales by sales person rather than by product or
sales unit, it is easy for the sales supervisors to identify whether each salesperson has
met the assigned sales quota. If marginal costs are also assigned by salesperson,
each salesperson’s contribution margin can be established as one criterion for
performance evaluation.

The primary types of information as inputs used for the sales analysis
subsystem are:
i) Information about customer invoices and back orders that is provided by the
sales transaction processing systems,
ii) Information derived from the oral and written reports of sales personnel,
iii) Product cost information obtained from the cost accounting information systems,
iv) Information about the sales transactions may be available from the sales files or
the customer files.,

10.4.2 Sales Forecasting

Sales forecasting is important for planning sales and promotion strategies and for post
period
6
evaluation of salesperson’s performance. Sales forecasts are generally the
first step in the profit planning cycle of the entire organization e.g.Integrated Applications
they initiate the
short-term financial and marketing planning cycles. If forecasts for the period are
seriously in error, the organizations entire budgeting activity will be based upon the
wrong level of activity.

The basic functions of sales forecasting can be grouped into the two categories of
short-range forecasting and long-range forecasting. Short-range forecasting deals
with forecasts of sales for periods up to one year, whereas long-range forecasting is
concerned with sales forecasts for a year or more into the future. Forecasting
requires the application of mathematical and statistical methods, which consists of
structured procedure. Methods like time series analysis, regression models etc., are
used for sales forecasting.

Production planning, work force planning, and production scheduling are based on
sales forecasting. Materials are ordered and personnel are employed and reassigned
according to the expected sales pattern for the next period. If sales are overestimated
either finished product inventory levels or materials inventory will be excessive, or
personnel will have to be laid off. Conversely, if the sales forecast is too low, either
sales would be lost because of inventory shortages, or higher costs will be incurred as
a result of overtime and need to secure additional materials in a hurry.
The basic information needed for sales forecasting is as follows:
i) Past sales, provided by the sales analysis information system
ii) Market conditions, provided by the market information system
iii) Competitor’s activities provided by the competitor intelligence information system
iv) Promotion and advertising plans, provided by the information system for this
function.

10.4.3 Advertising and Promotion Information System

Promotion and advertising department within marketing devotes its attention to
planning and executing advertising campaigns and to carry out various product
promotions such as package coupons, contest, special sales and trade shows. This
department’s activities are focused on increasing sales revenue without an equivalent
increase in costs.
Marketing managers need information to help them achieve sales objectives at the
lowest possible costs for advertising and promotion. Sales analysis provided by the
sales information system can assist the advertising and promotion group by
highlighting trends that may influence the allocation of promotion and advertising
expenditures. Additionally, a time series sales analysis that correlates advertising and
promotion activities with subsequent sales will indicate which are the most effective
promotion campaigns for particular products.
The market research information system can supply the promotion and advertising
information system with information about market size and about characteristics for
each product for the market. This is helpful for tailoring promotion to specific market
segments.
The promotion and advertising information system should be storehouse of
information that helps mangers build on past experience with promotion and
advertising. By systematically organizing and analyzing this information, an
organization can eventually establish a body of knowledge about what the market is
like and how it responds to each of several types of promotional activities for each
product. However, the complexities of markets can change rapidly, and the
information systems already described should continuously ‘refresh’ and modify this
promotion and advertising information base in light of the most current information
available. 7
Information Systems - II
10.4.4 Market Research
Market research focuses on the entire market for an organization’s product. One
purpose of market research is to assess the overall size of the market for each
product line and for each product within a product line. Potential market size can
change rapidly as economic conditions and technology change.

The market research information system provides marketing intelligence to help

managers to make more effective decisions. It also provides marketing managers
with information to help them plan and control the market research projects of the
firm.
The key information needs for a market product potential analysis are:
i) Information about the economy and economic trends and the probable impact of
these trends on demand for the product
ii) Information about past sales and sale trends for the entire industry and
iii) Information about competing ‘substitution’ products.
Usually the market research department assumes responsibility for gathering and
analyzing this information.

10.5 USE OF COMPUTERS IN MARKETING

MANAGEMENT

Computers and statistical analysis software help the market research activity collect,
analyze, and maintain information on a wide variety of market variables that are
subject to continuous change. This includes information on customers’ prospects,
consumers, competitors; market economic and demographic trends. Data can also be
gathered through telemarketing and computer aided telephone-interviewing
techniques (CATI).
The main benefits derived from computer- based marketing information system are:
1) Control of market costs
2) Diagnosis for poor sales performance
3) Management of fashion goods
4) Forecasting
5) Promotional planning and corporate long-range planning
6) Purchasing

Activity B
Prepare a brief report on the market planning and publicity planning of your
organization, and the role computers and MIS can play in that

.............................................................................................................................

.............................................................................................................................
8
Integrated Applications
10.6 SUMMARY
In this unit, you have learnt about the role of transaction processing in data retrieval.
Two important areas of the functional management say marketing and human
resource management. As each of the sub-systems perform specific operations/
transactions to support the main system, various inputs required for these subsystem
have been discussed in detail. By now you have come to know how the development
of the system require to be assisted by the different subsystems in the transaction
process.

10.7 UNIT END EXERCISES

1) Identify the role of transaction processing system in the development

information system.
2) Suggest few modules, you would like to add to improve the Marketing
Information System.
3) List the analytical methods, which could be used effectively in the modules of
human resource management for the development of subsystem.
4) How does computerized Personnel Information systems help in managing human
resources more efficiently?

10.8 REFERENCES AND SUGGESTED FURTHER

READINGS

Course material designed by IGNOU for the programs of Computer and Information
Sciences.

Murdick, and Thomas C. Fuller. “Subsystems for MIS”. Journal of Systems

Management, June 1979.

Murdick, Robert G. MIS: Concepts and Design. Englewood Cliffs, N.J. Prentice-
Hall, 1980

Robert G. Murdick, Joel E. Ross and James R Claggett. Information Systems for
Modern Management, Prentice Hall of India, 1997

9
Information Systenls - II

I n this i~nit,you have learnt about the role of transaction processing in data retrieva!.
Two i~iiporta~it areas of the fi~nctionallnanageinent say marketing and liil~na~i
resource management. As each of tlie sub-systems perform specific operations1
tra~isactio~is to support tlie mail1 system, variorls illputs required for these subsystem
have been discussed in detail. By now you have come to know how the developnlerlt
of the system require to be assisted by the dieerelit subsystems in the transaction
process.

10.7 UNIT END EXERCISES

1) processing system in tile development

Identify tlie role of tra~isactio~l
information system.
2) Suggest few modules, you w o ~ ~like
l d to add to improve the Marketing
Infoc~mationSystem.
3 j List tlie a~ialyticalmethods, wliicli could be used effectively in the modules of
I ~ u ~ i ~resoilrce
an 1iia11age1nelitfor tlie clevelopme~atof subsystem.
4) Information systenls help in ~nanaginghuman
Haw does compalterized Perso~l~iel
resources inore efficiently?

10.8 REFERENCES AND SUGGESTED FUPQTHER

READINGS
Course material designed by lGNOU for the programs of Computer and lnforniation
Sciences.

Murdick, and Tlio~nasC. Fullel: "Subsyste~nsfor MIS". Journal of Systenis

i21~17~1gemenf.
June 1979.

Murdick, Robert G. M/S: Concepfs and Design. Englewood Cliffs, N.J.

Prentice-Hall, 1980

Robert G. Murdick, Joel E. Ross and James R Claggett. Infornzation Systems for
Modern Management, Prentice Hall of India, 1997
UNIT 11 T NSACTION PROCESSING
SYSTEMS-11: OPE IONS AND
FINANCIAL MANAGEMENT

Structure
I I .1 Introduction
1 1.2 0b.jectives
1 1.3 Transaction Processing Systems
11.4 ProductionIOperation Systems
11.5 Inventory Management Systems
11.6 Computerized Maintenance Management
11.7 Financial Info~~mation
Systems
11.8 Financial Management Software
11.9 Computes Aided Financial Planning
11.I 0 Sulllllla~]\'
1 1.I I Unit End Exercises
11.12 References and Suggested Furtlicr Readings

11.1 INTRODUCTION
I n the previous unit you have learnt about transaction processing systems in I-luman
Resource Management (I-IRM) wncl blarketing Management (MM). You have learnt
about sub systellls o.f I-ILIIIIS~II I~CSOIII-CC Information System (recruitment, retention1
service conditions and reti~~cment). Simi larly you have learnt about subsystems of
marlteting info!-mation systems (Sales ~nanagement,.fol-ecastingof sales, market
research and advertising).

Businesses today are .foitndecl asound information systems that have transaction
processing as tlleis ma.jor component e.g, sales ordel- processing, purchase order
processing, i~ccounting,pa>,roII, prodirction and stock (or inventory) control and
booking etc. Most of these systems \\:orli in co~iji~nctionwit11 other systems ta provide
management information to si!ppo~-tdecision-m:~king.

In this ~ ~ nyou
i t would learn about another set of fi~nctionalareas i.e. Operations
Management (OM) and Financial Me~~agenient (FM). You will learn about
sUbsYstemsof Operations Management ancl subsystems of Financial ll1forlnation
Systems. You will Icarn about methods oI:computerization of operations and financial
functions.

11.2 OBJECTIVES
After readins this wit. you should be able to:
Describe the subsystems ofoper.ations Management and their integration;
Identify the colnponents of Inventory Management Systems;
Zsplain the role of Computerized ~naintenancemanagement;
Define various aspects of financial systems: and
Iclentify problems associatecl with computerisation of financial systems,
111.3 TRANSACTION PROCESSING SYSTEMS
nnsnction processing is def71iedby on1 ine dictionary and search engine
t\ 41rpedia.cnmas a t>pe of computer processing in which the computer responds
.aT!:, ,linlcly IG ilzet' ; -quests. Each recluest is considered to be a tra17,suction.
"1 ::?intic te,!c~s;la:hines Ibr banks are an example of transaction processing. The
GP;',51t: ~ f r r a n s a c r i op~-occ-ssil~g
~~ i h batcli processing, in wliicli a batch of I-equestsis
:,;red aiid tl1el;r execuicd all at one time. Transaction processing requires interaction
\+lit!ia uscr, whereas batch prdcessing can take place without a user being present.
An exa~tipleof batcli processing is the way tliat credit card companies process
b~lling.'flie customer does not receive a bill for each separate credit card purcliase
bti\ one monthly bill for all of tliat nlontli's purcliases. Tlie bill is created through
bate11 processing, wlie~-eall of tlie data are collected and lheld i~rltilthe bill is
:~rcvessedas a bntcli at the end of the billing cycle.

'I'ransactions are tlie activities tliat are performed on daily basis by most businesses.
These could be of two types viz. co~iimercialtl-a~isactions(activities pertailling to
buying. selling, offering sc~.vicesorpaying bills etc.) and recorcli~?gorretrievingdata
(activities pertaining to booking a ticltet, registering a customer 011a or looking up
solne information etc). Many a times these transactions are lii~gein n1.1mbersand one
reqi~irescomputer assista~iccto deal with tliem. Also tlie speecl ancl accuracy with
wliicli tlie information is to be processed should be high level. 'This has led to
clevelop~iie~it of systems that could process transactions at Iiigl~erspeecl, lesser cost
and I1 iglier accuracy.

Businesses today are discovering applications that can benefit from a T~~ansaction
Processing System, mainly because tliese systeliis call now be made fi~nctionalon
personal co~nputers.'l'lius, transaction-processiiig systems are being used to liandle
Inany s i ~ i i ~ ~ l t a ~ iusers
e o i ~tliat
s work on tlie same set of data.

A transaction processing system receives tlie data fro111all input source lilic a
customer and or a barcode or ally otlier data-capturing device. Tlie systeln tile11
performs tlie transaction, cliecks it validity and report it In tlie for111of summary or
esecutivc report to the management.

Tlie Figure given below shows tlie typical fi~nctioningof a transaction processing

-
system.

Transaction
Sumn~ary

Input Transaction Data Output

Processing

Figure 11.1: A Typical Transaction Processing System

11 1.4 PRODUCTION/OPERATIONSYSTEMS
Tlie operations management discipli~ieconsists of a range of areas dealing with the
design, operation and control of production syste~ilsand si~bsystems.Operations
Management is responsible for tlie translation of resources into prodi~ctsor services
tliat custo~iierswill buy. It is interconnected with the otlier company fi~lictiouslike
Hu~iianResources, Fi~laliceand Marketing. A systems approach takes into account Trr~lsactionProcessing
all parts of the system. A system is defined as a collection of persons, ob-jectsand Systems-11: Operations and
procedures for operating w itliin an environment. Every organisation can be Financial Mtanagcment
considered as a system consisting of interacting sub-systems. A system gathers tlie
input and co~ivertsit in solnc ilseful output by tlie means of a conversion process.
Figtn.e 11.2 illustrates this.

ADJUSTMENT
Needal

labour
Capital
Managcrncnt

INPUT

COMPARISON
Fig~lre11.2: Conceotual Model of a Production/Operations System
: f c / ( ~ / ~ ~ c ~ IA,lL5'-j:
Sou~~ce: , / i . o ~A/l(117(igc~n7cnl
ir ufAd(icl7ine~niid M(i/erinl,s

I-lowever; the foci~sof operations ~iianagementhas experie~iceda clia~ige.There has

been increased attention given to t;he custo~iiernow. Operation managers are now
c.ustomizing their \vorl<progress. '~Iieyare working to convert raw ~iiaterialillto
iinished pl.ndi~crsarid sim i~ltaneouslydelivering services to make customers satisfied.
The rdc of tlie operations mannger vnl-ics in every industry. I n general terms, all
operations manager looks at every process i n the business, breaks it down, analyses
it, and makes tlie fi~ialproduct better with a custo~nercentric view. Figure 11.3
Iligliliglits tlie new .Tocus.

Rcquiren~cnts
on Suppliel-s

l l i p ~from
~t
-+

L
-
Conversion~ransforniation
Process

Process Priniarily Adds Value to

-t Customer
Requirements

output to
Suppliers F Inp$ to ProvidcOu tputs to A
r
Customers Customer

Requirements
on Management

3
I
Effective & Efficient
Use of all Factors of
Conversionl
T~~ansforrna tion
Figlire 11.3: New Focus of a ProductionlOperations System
SOL1l.c~::~C/(IIJ/LY!
11.0111A4,5'-53. Pro~/t~~ti011/Ope1~uli017.1'
Mc~nngel~lenl
I
I

Information Systems - II Let 11sdiscl~sssome of the processes that are linked to production1 operatio~is
I management. Suppose your company wants to launch a new product then it will be
I the duty of the operatio~isnianagers to manage the logistics, tlie costs, the skills, and
I
elie equipnleiit necessary for the pl.oduction of tlle new product. He would then have
works concerning the manr~factl~ring and production processes of tliat product.
St~pplycllai~land logistics activities like purcliasing prices and levels, storage of raw
niaterials and itivento~ycomes at tlie next level. After that, the operations manager
becomes busy with a~~alysing and improving quality of the product. The operations
illatlager also providcs costs for each phase of tlie operation. Tlie operations
manager also covers issl~eslike replacement and repair of equipment, which comes
u~iderthe d o ~ i ~ aofi ~maintenance.
i Finally there are facility lnanagelnent issues like
e~ivit-onmentalregulations, waste ~nanagement,site locations and employee security
that are managed by tlie operations manager.

New Product
Development

Facility
Management
PROCESSES LlNKED TO
PRODUCTION1

Supply Chain Quality

& Logistics Management

Figure 11.4 : Processes Linked to Production/Operations Manager

1 . 5 INVENTORY MANAGEMENT SYSTEMS

In any rlia~i~~facti~ring
set-up, generally a bigger chunk of ~nan~~facturing costs are
incurred on the raw materials used to produce a product. Inventories are maintained
to stock idle resources for f'i~tureuse. Manufacturing organisations keep i~~ve~ltories
of raw materials, components tools and eqt~ipmentsand finislied goods. Inventories
are maintained to avoid the stock out of a product tliat results in stoppiiig of tlie
progress of the production process. Both low and high level of inventory has its ow11
demerits.
Here are basically two types of inventory ~lianagementsystems: Independent demand
ancl dependent demand. Dependent demand inventory is defined as tlie inventory of
items that are unfinished goods s ~ ~ casl icomponents, parts 01- subassemblies wliile
iudependent demand inventory is defined as tlie inventory of finished goods.
Independent demand inventory ~ i i ~be ~ sforecasted
t wliile dependent demand
inve~itorymilst be calculated.
Figz~re11.5 shows that dependent demand inventory management syste~nscan be of
~~~~~ee types, namely material requirement planning system (MRP), Just in time systelii
(./IT) or a Iiybrid of both. Independent demand inventory systems are classified in
two liiodels, ~~amely, production economic order quantity model for tlie manufacti~rers
alld basic EOQ model. TIie basic EOQ model is fi~rtherclassified depending on tlie
Transaction Processing
WENTORY Systems-11: Operations and
MANAGEMENT Financia! Management
SYSTEMS

I Material Requirement 1

EOQ Model with EOQ Model wit11

intentional Shortages Differential Discounting

Figure 11.5: Types of Inventory Management Systems

Source: Adapred~jbowKanishka Bedi (2001) Pi.o~lz~crion

& O~~eratior~s
Monngenienr,
Prass, Dclhi
O ~ j o r dUnii~er.~i[)!

Tlie economic order quantity ~i~odels helps in tlie optimal level of invelito~y.
Tlie production ~iiodelof i~ive~itory helps in determining tlie optimal size of a
population lot wlie~isales and production takes p l ~ c esin~ultaneously,Now tliere are
software prograliis that a1low accurate pinpoiuting of process tlows and tjmiug of
supply needs. Tlie benefits of JlT model are tliat tlie order comes in when one need it
so long tern1 storage of supplies is not necessary, It refers to producing or obtaining
olily what is needed, wlreli it is needed and in just tlie aliioulit needed. Tliere is no or
low cost incurred in holding the inventory. Material Requirement Planning (MRP)
systems call help in pla~ini~ig and dete1.1nini11gtlie supply ~iecdsand timelines for new
hlallllfact~lrilipprocesses. They Iielp in predictingdelivery times, respondi~igto
clianges, and have better- colitrol over tlie varioirs plinses of production. MRP is
basical Iy process for deteminirrg material, labour and mncliine t.equire~nentsin a
~nan~~facturing environment. MRPII (Manufacturing Resources 131anning)is tlie
cornbination of material requirements plannirig (MIIP), Capacity Requirements
i'lanning (CRP), atid Master Production Scheduling (MI'S). MRP was origi~ially
designed for materinls planning only. Wllen labour and machine plnnning were
incorporated it became ktiow~ias MRPJI. Todny tlie de.finition of MRPII is generally
associated with MRP systems. One can combine tlie master production scliedule, tlie
bill of ~iiaterialsand tlie vendor lead times to prod~~ce a new schedule of raw
materials purchases with tlie help of MRP. Tlie ~.esultis that the riiaterials are
produced on time and t l l ~ the
~ s cost of raw ~naterialsirive~itoryis reduced.
t

Wllen h/lKPJandJIT are co~iibi~ied tlien tlie details of tlie j?roduction scliedules are
shared with tlie vendors so that they call also plan tlieir prod t1cti011sclied~~les
?inii~ltaneot~slywith the nianuTacturer. Tlie coiiibi~iatioliof the two reduces two
ilive~itorymanagement 131-oblenis(finislied goods at the vendorQand raw tilaterials at
the manufacturer) into one (finislied goods at llic vendor). 'l'liere is one safety stock
problem not two (Mnrthy*2002).
-
S y s t c ~ ~ ~11s
Irll'ur~natru~t Tlie~eare two inore subsystems that support the maill system n-~anufactizri~~g. Tliese
are Comp~~ter-Aided Design1 Computer-Aided Manufacturing (CADICAM) and
Computer-Integrated Manufacruring (CIM). Computer-Aided Design (CAD) is the
use of a computer in industrial design applications such as arctiitecture, engil~eering
. and ~nanufacti~ring while Computer-Aided Mani~facturing(CAM) is the use of
c o ~ ~ ~ p iaids
i t e r(hardware and software) in planning, tracking, analysing, and
implementing the co~istructionof manufactured items. It is basically tliat part of
Computer Integrated Manufacturing (CIM) that is restricted to the operation and
control of ~t~siiufacturing fi~nctions.Computer Integrated Mal~i~facti~ri~ig (CIM) is
thus an integrated use of compute^.-aided techniques in manufacturing. This includes
CAD and CAM. Tlie ~nainprerequisite f ~ CIM r is a database that accessible by all
the d iscipl i~iesi~~volved in tlie manufacturing process, si~clias design, developme~~t,
manufactrrre, distribution, billing etc. CIM is an integration of MKP, JI'T, CAD and
CAM. It brings all these manufactul.ing systeliis into one.
Activity A
of tlie inventory system in your organization. In which type
Prepare a flow diagra~~i
does it fall?

-
1.6 COMPUTERIZED MAINTENANCE
MANAGEMENT
You will read about this is 1iiot.edetail in the course MS-57: Maintenance
Ma~~agement. We have taken sollie excerpts fro171tlie illlit IT-based maintenance
management to give you an idea of role of co~npirtersin ~nairite~iance functions.
Though tlie use of IT lias beer1 adopted quite lately for maintenance functions
comparecl to other f~~nctions like finance, personnel, materials etc., trernendous
progress has been ac1iie;ed in tlie use of IT in both tlie maintenance management
and engineering fi~nctions.Use of I?' in Inany organizations has resulted in Inany
benetits over tlie coliventional manual systems. So~neof these benefits Iiave been
indicated in tlie table given below:

It should be recognized that co~nputersare basically tools in the hands of managers to

achieve their objectives. As tlie famous saying regarding colnputers 'Garbage in,
Garbage out' signifies, sufficient a111oi111tof preparatory and systematic analysis
would be I-equil-ed,if co~~~puterization efforts are to succeed. Indeed, there liave also
bee11 number of cases where improper use of con~putersliave added to tile misery of
~ i ~ a i ~ ~ t e n~nanagers.
ance Sonie of tlie benefits mentioned above liave not accrued but
exactly the opposite has liappcned ill those companies. Hence tlie necessity to
completely visi~alizetlie maintenance f~~nction in a systc~naticfasliio~iand then go for
ilse of computers to achieve tlie pre cu~lceivedbenefits.
'lhble 11.1: Henefits of IT Enabled Mainteniar~cc T L ~ r s ~ ~ c t iPrsccssi~ig
on
Sy~tems-Ill:Operntions ~ n d
Fln~ncinlMrnogement
I
I
Reduction in clowr~timecosts
1 Reduction ill ~iisintcna~ice
costs
I Reduction in ~iiaterialscosts
I Reduction in 1ife cycle costs of rnaclii~iery
Increased availability of plant and equipment
I Redi~ctionin tlie breakdowns
Increased atid este~tdedusage life of plant a~ideqi~iptnent
Improved diagnosis of 11iacliineproblenis
Availability of inacliine, operation and ~iiaintennnceinfor~nationin right
time and in right perspective
I'roper plannlrig. sclieclitlirig nr~dcolitrol of preventive, predictive o11d
corrective nlilintenance
Lfiicietit control of backlogs
Better utilization of ~iiaintenanceresources, men, inaterials and logistics
Availability of t-listory of ~nacliinestoenable decisio~llllakirig
Ensi~reefi'icacy allti efficiency of reportirlg systems
Better interface anlongst mai~itenanceancl utlier fi~nctionslike operation,
materials, quality, safety etc.
Recli~ction in irnnecessary paper wol.ks, il-t essence, i~nprovemetitin the
overall pl-oductivity and profitability of the organisation,
Source: !\//.$-jA,if~it.t1entr17c
?: Adcn7cgei11enl

The Figtrre 11.6 explains tlre conceptual model tllroi~ghwhich the ~i~aintenar~ce
ftl~lctioncan achieve its o?jectives on a sitstairled basis

lnfori~i~tion

MAINTENANCE

Contlition Rnsetl

Figure 11.6 : Input-Maintenance-Output Model

Source: hi?-j 7: hd~rinlc-17ar1cci
Mur7a,ge111ot?t
We slial'l now study tlie common ~nodt~les
present in the computerized maintenance
Inanagenient system (CWIMS) software.

Machinery Itiformation and Preventive Maintenance Module: This {nodule

normally contains tlie following facilities:
e Enable que~yi~ig
and printing static equipment information,
0 PM work order scheduling by calendar or ~iieteredusage & printing of PM work
orders.
@ of mil [ticrafts fol..performi~igtlie I'M,
Scliedi~li~ig
e Scliedi~lingPM based on prior completion of PM, request of Maintenance
Planning, predictive nlaintenance results etc.
Balance PM work load over tlie scheduling period,
0 Forward planning to infor~nproduction function in advance in case PM requires
eqi~ipmentshutdown.
-l-Ile preventive maintenance work orders would basically track maintenance labour
and 11iatel.ialsl~tilizedso that these costs can be calculated and monitored, In addition,
the downtime due to preventive maintenance and tlie corrective ~naintenance
requirement also collected for cornpilati011and a~ialysis.

Normally tlie PM software module has the ability to print the work orclers in a
specific sorted order, the key For wliicli could be tile craft, department, priority, etc.
illdependently 01-in combination. The module also produces various types of reports
and queries, some of wliicli are, past due work orders, back log of non-completed
work orders, eqr~ipment Iiistory, eqi~ipmentwise down time, cost of preventive
maintenance, type a11d number of derects observed and corrected etc.

Correctivc Maintenance and Work Order Module: The execution of corrective

maintenance activities tliroougli a well-structured work order system helps a
maintenance department with higher availability and reduced costs. Ideally, tlie work
order system should produce enough information to enable tlie maintenance manager
take proper decisio~iregarding allocation of tlie resources to achieve overall
i ~npsoveme~lt in the productivity. NorniaIly tlie corrective ~naintenanceand work
order ! n ~ d u l has
e tlie followi~igfeatures:
Traclc labour a~iclmaterial utilization and costs thereof,
e Assign different crafts tor different works,
6 Identify work orders separately for eqi~ipmentunder warranty,
0 Tracli contracted out ~iiaintenanceseparately,
e Facilitate llse ofspecial tools and materials,
@ Enable obtaining special permits like safety I electrical lock out etc.,
Enable sclieduling based on val.ious logics like priority ofequip~nent,priority of
jobs, ~iiaterialavailability, craft etc.,
Permit input of infor~iiationrelated eliiergency maintenance, which are not
scl~eduled, after tiley are conipleted.
Just like tlie PM module. the corrective maintenance nodule is also capable of
produci~igvarious types of I-epurts. tlie most i~iiportantof wliicl~are:
@ Active and P e n d i ~ gwork orders report,

@ Cost of Corrective Maintenancr.

Spare Parts Control, Module: Tliis module is very similar to a materials Transaction Processing
management module, which helps in classifying maintenance materials, purchase, Systems-11: Operations and
Fininncia1 Management
inward goods
- inspection, issue and receipt. It also tracks consumption and coiitrols
inventory. The main difference between a materials management co~nputerized
software and a spare parts control module would be that of difference in numbers
and types and the logics and models used for inventory controls. There could also be
renewable spares (also called rotable spares) whose position needs to be tracked
separately in tlie spare parts control module. Some of the features of a computerized
spare parts module are give11below:
Predictable materials are included in tlie work orders and their need
communicated to stores,
0 Matching of parts required to availability automatically,
Automatic reordering based on inventory control/ p~~rcliase
logic,
0 Acc~~mulation
ormaterial costs in the history ofequipment,
Linking of equipment data to spare parts data,
I
0 Performance reporting on cons~~mption,
inventory, stock outs etc.
Condition Monitoring Modulc: The modern day computerized software systems
for maintenance have a condition ~no~iitoring module wliicli can receive equipment
performance characteristics like vi bration signals, temperature, pressure, Iubricatiori
oil condition etc. directly from tlie sensors mounted on tlie critical equipment. These
information w o ~ ~ be
l d suitably trended and various corrective action like issue of
alarms. tripping of tlie equipment, carlying out diag~iosticsto suggest preventive /
corrective maintenance elc. call be performed by tlie software. Since tliis type of
011-linecondition motiitoring wo~ildbe q ~ ~ iexpensive
te and may not be feasiblc for all
types ofequiplnent, there are also alternative portable data collector and analyser
systems which can be ~ ~ s independently
ed to manually collect tlie condition monitoring
data and analyser tlil-ougli a dedicated software.

11.7 FINANCIAL INFORMATION SYSTEMS

Historically, operations such as accounts payable, cost acco~intingand fitlancial
statement preparation were among the first to be automated, via pul~cliedcards
systems in tlie 1930s and 1940s and on computers in tlie 1950s and 1960s as in pay-
roll procedures. Tliese functions are largely routine, relatively easy to automate. The
benefits offered by such applicatio~istraditionally liave been in tlie for111ofclerical
cost reduction, and although they liave not normally led to dramatic increases ia
pl.ofitabiIity. they liave prod~~ced
sufficiently large savings to more than justify their
comp~lterisation.

I n spite of tlie traditional nature oraccounting and firia~iceapplications,several

sophisticated. liigli benefit syste~iisare being implemented in this ad~ni~iistrativeand
business area. ash management, financial modelling apd advanced purchasing
systems are three examples of tlie new intel-est in accounting and finance
I ' applications.

In large, diversified. or widely dispersed organisations, tlie management of cash

resou~~ces is a diffici~ltjob,yet one that lias a large i~iipacton profitability. Failure to
invest teliiporarily available cash, prematul-e payment ofobligations, or short-sighted
investnie~itprogrammes that force an organization to borrow at high rates, all result in
less than optil~ialuse of financial I-esources. 111an attempt to avoid these problems,
many large organizations are using computers to help collect, analyse and report data
about cash requirements and reserves. The benefits of such systems include less
frequent and smaller short-term loans, lower rates of interest. and higher returns on
short-term i~ivest~~ients,
Pnfor~nrtionSystems - 11 Financial analysis of proposals is the second area where colnputers are playing an
increasingly important role. Relatively straightfonvard simulation models enable the
financial manager or analyst to generate pro forrna statements that show the financial
irnpact of different proposals, such as adding a new product to a current line or
opening a new warehouse. The advantage of such models is that many possible
. outcomes call be evnl~~ated in the time that one or twci could be calculated by hand.
1 -
Advanced purcliasing systems are tlie third area of current interest. Computer-based
systems monitor the data aboutprice and quantity discounts, product quality and
reliability, and speed of delivery. On the basis of these data, computer programme
can calc~llatcvendor rankings and economic purchase quantities for individual items
and store product infor~nationthat helps buyers evaluate vendor performance and
negotiate favourable contracts with suppliers. be

Table 11.2 lists marly oftlie traditional accounting and finance applications as well as
those of high c ~ ~ r rinteiest.
e~~t

Table 11.2: Finance Systems : Computer Applications

7
......... ,................................ ..,.....,........ . ......... Most Complex
, .......................
Applications
C Lenst Complcx
- -

I
I

General 0 Cost Record ICecping 1 Cost Accounting * Cost Estimating

Accounting 1 Comparison to Standards
or Projected Amounts
0 Budgetary Accounting

Accou~~ts Q 1)reparnrion of A/P

Payable (Alp) Registers
* Cllcck Reco~lciliation
* ,411' Distribution
Vendor Analysis - Vendor Analysis 0 Make or buy
Volumc Purchase - Quality Annlyzis .
I'urchase Order Knowing Economic * Analysis of
Purchasing l'reparation and Follow-up Purchase Quantities Finnncial Proposals
Financial State~nent s Requirement Planning
Preperntion c.g. Cnsh Menagerne111
. , System
* Mainienance of
Shareholders Records

systems are primarily concerned with recordiqg business transactions in

Fi~~ajicjal
respect of wages.and salaries, purchases, sale sand other aspects of income and
expenditure, both capital and revenue. Records of such tra~isactionsprovide basis for I
it
the preparkion of periodic or annual profit and loss accounts and balance shersts.
[
As can be seen, the financial systems of a business are, effectively, accounting
'i
systems, which are often, stri~cturedas separate systems to the null-financial
systems. When systenrs are computerised, the separately structured systems arc a

often integrated for economy of data processing and administrative efficiency.

Functions of Financial Systems

One of tlie most important functions of financial systems is to ensure that all business
tra~~sactions are recorded in proper books of account, on the basis of recognised
.accounting pactice. Such accounting tra~isactionsare largely for purposes of
ci~stodiansiiip,as a public limited company is responsible to the shareholders - the
owners of the business -.and accordingly it is essential that the business records
portray a t r ~ and
~ e accurate record of profits and losses, assets and I iabilities.
I

Other function of financial system are summarised below: Transaction Processing

Systems-11: 0.perations and .
Planning and controlling all expenditure, both capital and revenue, Financial Management
'
Controlling the receipt and payment ofcheques, etc. relGing to business
transactions and relevant banking transactions,
Safeguarding the assets of the business in respect of plant arid machinery, stocks,
debtors and cash.
@ Mairitaiiiing statutory records ad per Government's regulations,
Preparation of periodic report for statistics, performance and results for iilter~ial
control and audit.

Activity B
I-low are tlie above functions being performed in your organisation? Record your
perception about them, function-wise, choosingone of tlie alternatives given below
1 regarding tlie~rperformance. .

( i ) Satisfactori'ly (ii)To some extent satisfactorily (iii)Not satisfactorily

Activity C
W)iat would yo11suggest to make tlie system more efficient?

11.8 FINANCIAL MANAGEMENT SOFTWARE

The microcomputei-can provide a new and very efficient tool to improve the service,
For example, it can transform efficie~icyby replacing a large amount of manual
record keeping and, perhaps more significantly, it can extend the quality of the service
being offered. After introduciri'g a co~nputerisedsales ledger, the regular balancing of
tlie ledger (itself a considerably easier task using a co~itrolledcomputer system) will
be accompanied by the printing of an 'aged' list of balances. From tli~sreport the
accoitntant can initiate atid ~no~iitora follow-up routine to recover any overdue .
amounts. In this and similar situations the firm will be offering a much more powerful
financial control system that combines the interpretative skills of the accountant with
the routine efficiency and a~ialyticalcapabilities of co~nputerisedledger systems.
Informrtion Syste~ns- I 1
ILluch of the software available for the practicing accountant wil I, of course, also be '
of use of his clierlts a s well as to other professional firms. Although some features
Inay be: required specifically for the accountant, his management control needs will be
very similar to tliose of o ~ l l e busi~iesses
r or practices so most programmes offered
ale described in their. publicity material i n ways that illustrate their widest possible
use, i~icludingsues for whicli they [nay be only ~narginallysuited. Some of the most
\-videlyused financial management software call be listed as:

@ General Leclger Stand alone or integrated,

Sales ledger Incorporating budgetary
@
-- Control and management
@ Purchase ledger
accounting.
@ lnvoici~~g
Stock col~trol
@ CCA adjusted clccou~its
@. Pay-rol l
@ Model ling tecl~niques

Budgets
Statements

Profit and

Account
L Balance
Sheet

Figure 11.7: The General Ledger

I
I

General Ledger Transaction Processing

Systems-11: Operations nnd
Tlie local point of lir~ancialaccounting systems in tlie general ledger is so~neti~nes Financial Management ' 3

~zferredto as tlie ~ionli~ial

ledger. The nomi~ialledger consists of accounts in \vhicll
transactions are recorded from tlie point of view of business and these are classified
.as 'impe~.sonalaccounts'. Impersonal accounts are sub-divided illto 'real accounts'
and 'nominal accounts'. Real accounts are concerned with the tangible assets such
as plant, ~ilacliineryand buildings, whereas nomina I accourits atid concerned with
cspensps, inco~iie,PI-ofitsand losses. Financial accounting sub-systems are directly
related to the general ledger by way of double entry co~ive~itio~i for recording of
bl~sinesstransactions. I n respect of tlie purchase accounting system, tlie general
Icdger contains tlie purcliase ledger control accoi111
t and a c c o nts
~ ~ from different
classes of purcliases. Tlie Sales accounting system lias accounts in tlie general
ledger by way of Sales Ledger control account. Similarly, the wages and salaries
accounting systelil have tlie wages and salaries control account in tlie general ledge,:

Cash t~~an~actions, in respect of tlie sub-systems indicated abr~veare affccted in the

general ledger: for cash receipts f'rom customers, ?hey are recorded in tlie Bank
account and tlie Sales ledger control account (t;~gzn*ell.7).

Compute~*isetlGer~eri~l
Ledger Systerils

Tlie Genel-al ledger system on cotnputer call be i~iiple~iiented

as an integrated system
lo fo'onii a total system - by combini~iga ~ii~nlber
of related sub-systen~sfro rlie
purpose of inil~rovingad~ninistrativeefficiency. Iklgtwe 11.8 describes tlie system
run chart for orie ofthe general leclger systems.

o ~ i~nailifeatures of a cc.)mputerisedgeneral ledger system,

We sliall briefly ~ i l e ~ i t itlie
which i1l.e easily available i l l tlie niarlcet:
6 Ailtonlatic double entry accounting
Accruals and prepaynients are automatically reversed in rile next accounting
period
@ Tlie general ledger is ~nai~itai~ied
as a database and tllc Al~alysisPrinting.
1'1.og1.ammecall report in any sort. seqLlelice and in illally reporting forlnats, which
call be sturctl o n conipllter.
@ posti~igscall be made
!Q,I.!en linked witli tlie purchase ledger, standard ~iio~~tlily
aulomatical ly,
A history lile uf all tlie transaction records can be ~liai~itai~ied
so that a~ialysisand
scl~eclulcsc,an be produced at tlie year end,
B~tdgetarycontrol call be exercised procl~ici~ig
V ~ I ~ ~ ~ I Ifro111
C C S Budget,
*
@ Budget llesi~ige~iablesbuclgets lo be altered by Ilercetitage clianges, and
produce financial prqiectio~isas result ofthe change,
@ No~ninalaccounts call be reanalyseci into cost or profit centres, producil~greports
in up to seven dit'ferent types of'sorl keys,
@
A year-end report procll~cessulnnlnry of each nonii~ialaccount for each
accounting period, conipared to budget and or previous years. I

. Figure 1l.h' illustrates compute^^ runs for. a ge~ie~*iiI ledger syste~n,which is based on
t 1 is derived from dnla produced by l.lie
{lieoutline, Figu1.r~ 11.7. 'Tllc i ~ i pto~ ~1.~111
separate co~tl(~uter applicatiulls in respect of'transactions rclating to stocks, pay-roll,
sales, purcllases. plan1 and niacliinery inclrrding depreciation, accruals and prc-
payments, accounting i ~ ~ ! j ~ s t ~ iand i t ~ 'The transactions datas in respect of
i e ~cash.
eacli applicati.011 is assu~nedto be stored on magnetic tapc. liun 1 is concerned wit11
colisolidating all ~ i o ~ n i ~leclgel-data
ial and tl~isis achieved by niergiog all tlie relevant
. ,
Infarrthtiarr Systems - 11 transactions o n tile general ledger codes. Tlte output from Run 1 is a co~lsolidated
file of transactions, which is input to Run 2 for updating the general ledger file. This
file is stored on magnetic disc to facilitate direct access to relevant general ledger
account codes, Run 2 also produce a list of detailed postings to each account.

At the end oftlie month, the general ledger file is input to Run 3 to produce a Profit
and Loss Account and Balance Sheet. The general ledger file i s also input to Run 4
together with a budget file, wl~ichis updated with actual expenditure providing the
cumulative expenditure to date for comparison with budgeted expenditure.
A variance report is then printed for analysis by respective cost centres.

ACCOU N'1'ING
ACCOUNT1NG. ADJUS1 MEN'I'S
SYSTEM AND PRE-I'AY MEN'I'S

'rransi~ctions

TRANSACTIONS BY
GENERAL LEDCiER

MERGE D
TRANSACTIONS

LEDGER
MASTER
UPDATE
( GENERAL LEDGER. k > I TRANSACTIONS
APPLIED /
LOSS ACCOUNT
.- AND LOSS
ACCOUNT AND
BALANCE SHEET

VAklhNCE
KCPORTS .

bp& hb&in
e".:urnpusrisedIntegrated GeneralLedger Systems
3 .
rrrcomplete records: 'I'his complex area has been a prime target for the Tra~rsactisnProcessiag I
development of computer programmes and these are available on most of the popular S~aLdR'sf operHtioRg "'"
Finsncinl Managenrent
microco~nputers.A typical package will hold between 250 to YO0 nominal accau. ;
headings and between 2,500 to 4,000 transactions. The routines for posting the
transactions will be so structured that each prime entry source will be postid
automatically to the respective nominal account.

Nominal account coding can be defined to suit each client. The for~riatof the
accounts can be used to provide an outline sequence within which to create tlie
accounts code list. It is advisable to allocate the coding in blocks that wilt allow
additional accounts to be opened without destroying this sequence. It is impossible to
define this structure without knowing tlie coding facility of a particular package or the
requirements of the client.

One exarnple using a four-digit structure could be as follows:

Witlii~ieach group LIPto 999 accounts might be available to allow for'the dctailed
analysis. With the'leserv& group (in the illi~strationtile 5000 series), more numbors
are available to be allocated to revequc and expenses items to be identified in the
profit and loss account. In this latter case, the series numbered GOOU onwards could
1
be used to create a profit or cost centre analysis within the profit and loss account.

A common featlire of many of these packages will be the automatic calculatiot~of

deprecation using preset depreciation parameters. Reports generated will usually
include:
@ Trial Balance
@ Bank a~idcash Reconciliation
0 Acijust~nentsAnalysis
@ Fixed Assets Schedule
Nominal Ledger Accoil~~ts
in Detail
Profit and Loss Accoi~rit
Balance Slleet
@ Source atid Application of Funds,
Most prograinlnes now offer perhaps Ilie most useful facility of all, n;arnsly the
preparation of a fuli set of tinal accounts, including notes to tlie accounts und the
director's ~~epol-t.However, it niust be said that some systems will not print to a
, particularly l~iglistandard and you may be unable to use ille printout from the
' ~nachhie for pl.esentition.

l~ltegrrrtedPurchase/Sales/Gerrersl Ledger: There are several packages

available which offer the above reports either as inclividunl nodules or as oc3
integrated system, One of these has bee11already discussed earlier Ixl ~ ~ i b l i t i t r t ~ ,
systems are now offered which link tlie sales and pt~rcl~ase ledgers to a stack cotirrol
Information Systems - 11 programme, and the sales ledger to an invoicing programme. Most systems offer
eitlier 'open item' or 'balance brought forward' on each account. Naturally, the oper.
item system offers a more cotnprehensive service - balance brought forward being
ideal for smaller businesses whose accounts is cleared monthly.

The system will create the double entry within the general for all postings through the
sales and purchase ledgers. Journal entries to the general ledger will only be
accepted if tlie debits and credits equate to zero, as will input through tlie purchase
and sales ledger, thereby ensuring that the trail balance must always balance.
Additionally, pay roll and job costing may be linked to the general ledger to produce
final accoilnts and other management i~~formation.

Other Financial Systems

A typical system will offer around 800 accounts and 4,000 to 6,000 postings per
month. It will hold details of custon~er'saccou~itsand register all sales transactions.
Initially, the user will be pl.ese~itedwitla a 'menu' ofthe various routines available
from which the required routine is chosen, as shown in Figure 11.9

Sales Ledger Menu

SALES LEDGER
Press the required number
I . Master file update
2. Master file print
3 . Batch posti~ig
4. Account enquiry
5. Cash allocation
6. Montli end routine

Figure 11.9: A Typical Menu

The customer master file will hold tlie name, address and the telephone nurnber,
credit limit account balance 3 to 4 months old, turnover statistics, sales territory codes
etc. The transaction file will hold details entered into the system together with all
invoices, credits, adjustments and cash items posted during the current financial
periods.

COMPUTER AIDED FINANCIAL PLANNING

f
Plans have a central role to play in a company's decision-making process. 'I'o do this
effectively they often need to present a number of alternative evaluationr, based on I
different ass~lmptionsand different ideas for new projects, product introduction and I

tlie like. Mere, then is the fundamental defect oFmanual planning and budgeting ,
I

methods, a defect. wliicli can often be overcome by the use of computcrised

methods. The plans, to be of any use, must be easy to produce answers in a number
1
of 'what if?' formats: I
t

'What happens if we give: an extra discount of 5 per cent for orders over Rs. 1000 I

resulting in increased sales volume of 2 per cent?' I

'Wliat happens if it only gives 1 per cent extra?' i
'Wliat if we keep the old version going lbr a furtller year and llold tlie price, at the
j
same time deferring its replacement and putting in Rs. 1,00,000 more for i
/I

development?' tI
'What if we open a new warehouse in Bhopal in two years' time which takes 10 Transaction Processing
percent of the volun~efrom Delhi and 25 percent from Bombay while sales go up by 'perations and 1
Financial lvlanage~nent
15 per cent in each region and how f ~ ~will
l l the three warehouses be?' 1

'Wllat does the picture look like if we run all three ideas (above) together next year?'
'What will change if we defer tlie new warehouse for a further year?'
'What if we put on a second shift with a 30 per cent premiurn on wages but at the
same time stop all production overtime?'
Given a calculatol; large slieets of paper, the basic information and peace and quiet,
any one of tlie above questions could be evaluated by most accountants or managers.
The work is quite straiglitfonvard. It would not be so easy to find the time to work
through all ofthem. But this is a scenario familiar enough in most companies, and
often it results in decisions llaving to be taken without an adequate evaluation being
completed. This is not so because there is, as is so often alleged, 'a lack of
information on which to base the decision' but rather because there is ilisufficient
time to work through all the options with pen and paper.

16, Other Overheads

24. Total Receipts 0 0 0 0 0 0 0 0 0 0 0 0 , 0

25. Total Payments 0 0 0 0 0 0 0 0 0 0 0 0 0
26. Closing Rank '0' DA 1400 1400 1400 1400 1400 1400 1400 1400 I400 1400 1400 1400 1400

Figure 11 ,I 0: Computerised Spreadsheet: An Example

Information Systems - II Othel-difficilltieswit11 ~nanualsystems, wllicli admittedly can be partially alleviated by
use of the Inore sopl~isticatedtypes of calculator, include working out discounted casll
flows and other types of evaluation of returns on hvestrnent. A computer, however,
wi I I drastically reduce the time taken.
Lastly, once a range of options has been worked out, tliey need to be looked at from
a variety of points ofview, nor~nallycovering their i~npacton:
a) Profitability
b) Cash flow
C) Capital requirelne~its
d) Balance sheet

, Tliis in turn brings a b o ~a, need for a great deal of further work if the full picture is to
be collated each time tlie plans are in any way changed, and further underlines the
fact that such an exercise is ~lnlikelyto be colnpleted adequately, if at all, with annual
methods alone.

Solutions Offered by Computers: Colnputers offer a variety of solutions to

planning p~*oblems.Tliey are often referred to as 'number cruncliers', and this is
very lnucli the job they do when used in any plannilig application. But the use of
co~nputersin planni~igstill leaves a number of otlier proble~nsunchanged. The
relevant information for input to tlie plan~liligactivitystill has to be available in a
suitable form, Chaotic accounting and control systems will not be of m ~ ~use c lin~
providing it. Tlie onus is still on management to think up new projects, ideas and
products to bring the plans to life. Assumptions still have to be made about
everything from the likely rate of inflation to tlie possible markets.

Without innovative thinking, there can be no plans, computerised or otherwise.

Befare they can form part of the plans, projects and ideas have to be investigated and
coasted. There is still a great deal oftliis and other preliminary work to be done
manually. Tlie computer's role is to take over the calculations, and allow a very large
number of options to be evaluated in a very sliort time.

Tliis Uliit lias attempted to introduce various concepts related to Production1

Operations and Finance.

We have retouched upon definition of transaction processing systems and discussed

about the new focus of a Production/Operatio~isSystem. We have discussed about I
two types of inventory management systems: Independent demand and dependent
demand. The unit lias further disci~ssedthe tretnendous progress that has been
acliieved in tlie use of IT in both tlie ~nainteliancemanage~nentand engineering
functions.

We have identified various computer based application systems and discussed in

detail about general ledger systems. We have also identified some problems
encountered with their implementation, We have also examined computerised
financial planning software.
Transaction Processing
11.11 UNIT END EXERCISES Systems-11: Operations and
Financial Manrgement

1) Wliat is change in tlie focus of operations management? Is this change in tlie

focus is due to tlie increase of competitiveness in Business? Elaborate.

3) What are the types of inventoty management systems? Define them and
partition them into fi~rtlierclasses. Also, briefly explain each subdivision.

3) Wliat is comp~~terized~naintenancemanagement? Explain tlie conceptual model

tlirough which the maintenance fi~nctioncan achieve its objectives on a sustained
basis.

4) How the financial systems, facilitated by coniputer software, are important for
economy of data processing and administrative efficiency?

5) Compilters are often referred to as 'n~trnbercruncliers'. Evaluate the statement

in tlie context of financial planning.

6) What are tlie main features of a cotnpirterised General Ledger System?

11 .I2 REFERENCES AND SUGGESTED

FURTHER READINGS
Best. P and Barrett, 1 984, Auditing Computer Based Accounting System,
Prentice-Hall: Englewood-Cliffs.

Clifton, H. D., 1986, Bztsines,~DataSystems, Prentice-Hall: Englewood-Cliffs.

littp://www.weboped ia.com/TERM for definitions. Site accessed on 22/5/04

Kan is11ka Bed i (2004), Production &Operations Manugement,

Oxford University Press, New Dellii

MS-5: Management of Machines and Materials, School of Management Studies,

Ind ira Gandlii National Open University.

MS-53: Production/Operations Management, School of Management Studies,

lndira Gandlii National Open University.

MS-57: Maintenance Management, School of Managetnent Studies,

lndira Gandhi National Open university.

Murthy CSR (2002). Manugem~entInformation Systenu: Texl and Applications,

Third Edition, Himalaya Publislling House, Mumbai

Paul Beynon-Davies (2000), Database Systenis, Mac~nillanPub Ltd; 2nd edition

Pocock, M. A. and A.M. Taylor, 1984, Handbook of Financial Planning and

Control, Gower Publishing Co: London

Walker D.(1 989), Computer Bused Information Systems, Eisevier Science Pub Co;
2nd edition.
Integrated Applications
UNIT 12 INTEGRATED APPLICATIONS
Structure
12.1 Introduction
12.2 Objectives
12.3 Integrated Software Applications
12.4 Advantages and Business Utility
12.5 The Competition
12.6 Business Software Solutions from SAP
12.7 Business Software Solutions from People Soft
12.8 Business Software Solutions from Oracle
12.9 Business Solutions from Microsoft
12.10 Summary
12.11 Unit End Exercises
12.12 Reference and Suggested Further Readings

12.1 INTRODUCTION
In the present competitive business age everybody wish to choose a system that suits
his business processes. Integrated systems are the systems that help in integrating
key business and management functions. They provide a high-level view of all the
activities that are going on in the business. In the earlier days, data used to be
collected from different nodes and then compiled in the form of a summary report.
All these processes were too time consuming. Presently the software does this
compilation or integration work. There are many packages that integrate the activities
of different business divisions and thus allow the businesses to devote more time on
productive things. However there are different needs of different business and one
should be careful in deciding about a software that would be useful to him. Any
company looks for these packages to integrate its corporate functions like finance,
manufacturing and human resources. This is a critical activity. As a budding manager
you should be able to understand the system requirement of your company. You
should be able to define the information flow, information requirements and
information usage so that you gain competitive edge. This unit is thus an attempt to
keep you updated on the latest in the business solutions area.

12.2 OBJECTIVES
After reading this unit you should be able to
• Explain the concept of integrated software applications;
• Describe their advantages and business utility; and
• Discuss the business solutions offered by market leaders.

12.3 INTEGRATED SOFTWARE APPLICATIONS

Literal meaning of “Integration” is combination or amalgamation. In terms of
computer terminology, “Integration” is a broad term for any software that serves to
join together or act as a go-between between two separate and usually already
1
Information Systems - IIIntegrated software applications for business gives you the
existing applications.
ability to integrate the diverse information sources pertaining to your business into a
single framework. This integrated information can then be shared by applications
such as Customer relationship Management (CRM), Supply Chain Management
(SCM) and Business process Re-engineering (BPR) systems.

Let us see the definitions (source: http://www.webopedia.com) of the terms that we

have used above:

ERP: Short for enterprise resource planning, a business management system that
integrates all facets of the business, including planning, manufacturing, sales, and
marketing. As the ERP methodology has become more popular, software applications
have emerged to help business managers implement ERP in business activities such
as inventory control, order tracking, customer service, finance and human resources.

CRM: Short for customer relationship management. CRM entails all aspects of
interaction a company has with its customer, whether it be sales or service related.
Computerization has changed the way companies are approaching their CRM
strategies because it has also changed consumer-buying behavior. With each new
advance in technology, especially the proliferation of self-service channels like the
Web and WAP phones, more of the relationship is being managed electronically.
Organizations are therefore looking for ways to personalize online experiences (a
process also referred to as mass customization) through tools such as help-desk
software, e-mail organizers and Web development applications.

SCM: Short for supply chain management, the control of the supply chain as a
process from supplier to manufacturer to wholesaler to retailer to consumer. Supply
chain management does not involve only the movement of a physical product (such
as a microchip) through the chain but also any data that goes along with the product
(such as order status information, payment schedules, and ownership titles) and the
actual entities that handle the product from stage to stage of the supply chain.

There are essentially three goals of SCM: to reduce inventory, to increase the speed
of transactions with real-time data exchange, and to increase revenue by satisfying
customer demands more efficiently.

In computing, SCM typically is used in reference to software applications that enable

more efficient management of the supply chain.
BPR: Short for Business Process Re-engineering. It is aimed to make radical
changes in an organization from the ground up in an aim to improve performance and
make more efficient use of resources. The concept of BPR generally includes the
use of computers and information technology to organize data, project trends, etc.
(Source: http://www. computeruser.com/resources/dictionary)
Many big companies are giving high importance to software integration. Today
nobody wants to access data stored in multiple systems. They want to build strong
links between business systems and make information flow better. Let us take an
example, suppose you want to place an order through the net. An integrated software
solution will, on one hand, take that order, shift it and allocate them to the
manufacturing plant and on the other hand place order for the raw materials on the
basis of the stock, update the financial position of the company with respect to
suppliers and the inventory and so on. Many people have given different names to the
integration of ERP, SCM, BPR and CRM. These names include e-business,
c-business, m-business and KM etc.
There are many software that do these integration activities. To name a few there
are software known as Baan, Fourth Shift, Frida, JD Edwards One World, Manage
2000, Masterpiece - MP/Net, Micro strategy, Oracle e-Business Suite, People Soft
2 SAP R/3. We will discuss few among them.
and
Integrated Applications
12.4 ADVANTAGES AND BUSINESS UTILITY

There is a lot of interest among IT solution providers about packages that help in
ERP, SCM, BPR and CRM. The plea given is that they help in real business growth.
Companies actually want to integrate their diverse business processes to simplify
operations for faster decision-making. Many companies have realized that if they
have to survive and grow, they have to use tools that can provide quicker and useful
information and cut costs to increase efficiency. Till now IT was used in large and
multinational companies only. Small companies were not willing to invest more on IT.
In India, on an average, small and medium companies were reluctant to invest more
than 2-5% on IT. Circumstances have changed now. Businesses are not trying really
hard to reap the benefits of IT for gaining competitive advantages. IT has given
businesses a chance to generate information in real-time and thus grab opportunities
that were non-existent or unseen earlier. With the development of cutting-edge
technology, we have seen evolution of many systems that has adapted market
demands. IT is readily providing business solutions now. These solutions provides a
platform to integrate all processes in an organization enabling it to plan, trace and see
its 4-m resources (materials, machines, men and money) in the best possible ways to
service customers and reduce costs. If you want that your Business should survive
with low overheads and still run efficiently then you have no choice but to opt for IT
solutions.
A typical business solution is an integration of ERP, BPR, SCM and SCM. While
ERP can take care of functions like accounts production planning, payroll and
marketing etc., BPR can be used simultaneously to cut-down on all non-value added
business processes and paperwork. These systems are the enablers of change in the
business for better. With the help of these systems your business can compete better.
These systems if combined with the web help you to reach your customers most
cost-effectively. There would be no cost incurred on travel and communication and
no cost incurred on setting up offices and employees.
The key to establishing a good IT system lies in the proper planning. Businesses
should first specify their needs, processes and key data. They should clearly specify
the kind of information and its flow. Once these specifications are done, it is the
integration of information that is required. Once integration is done, information is
accessible to every department around the company.

4th

3rd

2nd

1st

Putting a Website
on the Internet

Online E-commerce
Shop on Internet

Using CRM & SCM to

Connect Suppliers and
Customers
Running your Entire
Company Using
Web-based ERP

Figure 12.1: Generations of E-business 3

Information
Given above Systems - II
is a pictorial representation of the generations of e-business. By this you
would be able to appreciate why we are talking about integrations and business
solutions and what place it has in the present world. It can also be seen that many of
the businesses in India have not yet touched the first generation even. It can be seen
that 4th generations business solutions are using web to integrate all systems. ERP is
used in a broader term here.

Activity A
Take the case of your organization or any other organization of your choice. Classify
the activities of the organization with respect to the generations of e-business.
Mention all the features by virtue of which you have done this classification.

..............................................................................................................................

12.5 THE COMPETITION

In this unit we would introduce to some of the leading players providing IT based
business solutions. But before entering what these players are offering, lets see the
interesting competition that is prevailing presently.

SAP is the third largest independent software company in the world. Microsoft has
taken an entry into SAP’s market. SAP was founded in 1972 by five former IBM
employees with a purpose of reducing expenditure on programmers for basic
functions like order processing and bookkeeping. It offered a set of pre-built software
programs. SAP was the first to redesign its software to work with distributed client-
server networks. Their products gained prominence with their application suite “R/3”.
Microsoft and Oracle are the only companies that sell more software than SAP.

ERP market
Just this minute

DataResearch DPU

Figure 12.2 : ERP Market Just this Minute

Source: http://www.dpu.se/rankerp_e.html
4
It is the market for small and midsize companies that triggered theIntegrated Applications
competition with
Microsoft launching its products. As the figure 12.1 suggests that there is a fight to
increase the market share. PeopleSoft has already acquired its next smallest
competitor, J.D. Edwards and Oracle launched an aggressive bid for PeopleSoft. As
there are major shifts in technology and new buying trends, these companies have to
innovate in order to grow. In tune to this SAP has introduced NetWeaver with easier
modification features and more enhanced ability to work with other systems.

SAP is now trying to prevent Oracle’s acquisition of PeopleSoft. It is also not ready
to accept Microsoft as a major competitive force in the business applications market.
In a nutshell there is so much of competition in the market that big players like SAP
recently re-launched an initiative to tackle smaller accounts with a cheaper, scaled-
down version of its software while striking up reseller partnerships with computer
dealers that cater to small businesses.

12.6 BUSINESS SOFTWARE SOLUTIONS FROM SAP

There are rapid changes in business world. New products are introduced and new
alliances are set-up. The companies, which are previously operating locally, are
looking for expansion of global markets. There is manifold increase in competition.
SAP is a world leader in business software solutions, with industry-specific products
for virtually every aspect of operations. SAP claims that its solutions are built on such
technologies that they will integrate with any systems. This is an important property
as it enables to preserve your previous investment on it and do not have to major
changes while migrating to SAP.

Figure 12.3: Global Picture of SAP Business Solutions

SAP offers highly specialized solutions and is the world leader is evident from the
figure 12.3. With installations in 60000 customer locations in 120 countries, SAP is
developed and supported by more than 28000 professionals from its global network.
Its popularity can be verified from the fact that 19000 organizations worldwide run on
SAP. SAP claims that its solutions are designed in such a way so that the businesses
get a better return on their technology investment. SAP claims to achieve great
5
Information Systems
results for many - II
companies, large and small e.g. Brother International got a 129%
return on its investment on SAP’s customer relationship management program and
Volvo Construction Equipment achieved an 89% increase in sales, a 43% reduction in
shipping lead times, and a fourfold increase in revenue per employee with the help of
SAP’s supply chain management program. SAP’s solutions are available for many
industries like aerospace and defense, engineering, construction, and operations,
financial service providers, insurance, telecommunications and banking etc. SAP
offers a suite that helps businesses to respond more quickly to changing customer
needs and market conditions. SAP business suite includes CRM, Financials, HR,
SRM and SCM and many more. The table given below describes them.

Table 12.1: SAP Solutions Under its Business Suite

S.no Solutions Description

1 mySAP™ Customer The fully integrated CRM solution that

Relationship Management facilitates world-class service across all
customer touch points

2 mySAP™ Financials The leading solution for operational, analytical,

and collaborative financial management

3 mySAP™ Human Resources The HR resource that helps more than 7,800
organizations worldwide maximize their return
on human capital

4 mySAP™ Marketplace An online marketplace solution that allows your

company to buy, sell, and conduct business
around the clock and around the world

5 mySAP™ Product The collaborative solution that helps your

Lifecycle Management designers, engineers, and suppliers achieve new
levels of innovation

6 mySAP™ Supplier Covers the full supply cycle – from

Relationship Management strategic sourcing to operational procurement
and supplier enablement for lower costs and
faster process cycles
7 mySAP™ Supply The world’s number one SCM solution.
Chain Management Gives you the power to dramatically improve
your planning, responsiveness, and execution

Source: http://www.sap.com/

SAP claims that since its solutions are based on open technologies they can integrate
across technologies and organizations to bring together people, information, and
business processes. SAP software comes in two bundles mySAP™ All in One and
SAP® Business One. An all-In-One solution helps in management of financials,
human resources, supply chain, customer relationships, and other key business
processes and is good if you want industry-specific functionality. SAP business one is
good if you want to perform your core business functions.

Figure 12.4 show that SAP solutions share common values. They integrate people,
systems and thus information. They have the ability to expand the number of users or
increase the capabilities of computing solution users without making major changes to
the systems or application software. These solutions are capable of responding to
changing social, technological, economic and market conditions. These solutions are
easy to implement and cost effective if you look at the long-term costs. A lot of real-
6
world experience is put into these solutions. Integrated Applications

Figure 12.4: Common Values of SAP Solutions

Source: (Based on http://www.sap.com/)

12.7 BUSINESS SOFTWARE SOLUTIONS FROM

PEOPLE SOFT
We have been talking about the competition that is prevalent between the big players
in the market. As per the intentions shown in Figure 12.2, JD Edwards has already
become a part of PeopleSoft.

PeopleSoft offers solutions that are ideally suited for company-wide functions such as
human resources, finance, IT, procurement, marketing, services and sales across all
industries. It works on pure Internet architecture that makes integration easier.
PeopleSoft’s solutions are available for many industries like financial, government,
education, healthcare and other services industries. PeopleSoft offers solutions for
Customer Relationship Management, Financial Management, Human Capital
Management, Service Automation, Supplier Relationship Management and Supply
Chain Management.

The table given below describes them.

Table 12.2: People Soft Solutions Under its Business Suite

S.no. Solutions Description

1 PeopleSoft® Enterprise A comprehensive solution offering real-time

Customer Relationship intelligence for smarter decisions. Seamless
Management integration among customers, financials, supply chain,
and employee management systems possible

2 PeopleSoft® Enterprise With this you can achieve productivity gains,

Financial Management slash implementation time and costs & significantly
lower risks associated with human error, employee
changes, and other factors.

3 PeopleSoft® Enterprise It is an enterprise-wide business strategy to

Human Capital streamline, deploy, and align the workforce to
Management (HCM) drive a higher level of business performance.

4 PeopleSoft® Enterprise It is the only suite that gives you real-time

7
Information Systems - II
Service Automation visibility and control over operating costs. You can
optimize your project investments, reduce project
delivery costs and maximize resources to increase
utilization

5 PeopleSoft® Enterprise It is a powerful solution that makes the entire

Supplier Relationship purchasing process more cost-efficient and
Management (SRM) enables more strategic and prudent spending
decisions.

6 PeopleSoft® Enterprise These are the solutions that promote business-to-

Supply Chain business interaction throughout the supply chain,
Management (SCM) from customer to supplier.

Source: http://www.peoplesoft.com/

In a nutshell, PeopleSoft offers a family of applications that are integrated. These

solutions have integrated business processes, data and applications. It gives power
and flexibility to enhance, deploy, and extend your applications.

12.8 BUSINESS SOFTWARE SOLUTIONS FROM

ORACLE

Oracle has an e-Business suite that offers a complete set of applications, which are
capable of automating many functions of the daily business processes. Oracle’s e-
business suite encompasses a wide array of functions. Figure 12.5 is the
representation of such functions.

Figure 12.5: Oracle’s E-business Suit Applications

Source: http://www.oracle.com/

Oracle e-business suite is an integrated set of business applications that deliver

comprehensive procedural computerization and thus complete information.
Information finally helps businesses in taking more informed decisions. Oracle has got
a lot of satisfied customers like McData has found Oracle e-business suite to be a
seamless, fully integrated and modular business solution that has enabled them to
8
meet the challenge of their growing business operations; American Integrated
Power Applications
Conversion deployed Oracle e-business suite to make reliable and accurate data
accessible to all its employees in real-time; TATA Teleservices gained by getting a
competitive edge in building customer relationships and GE Energy used this
integrated solution to identify their business opportunities. The table below gives you
a global view of different modules of Oracle e-business suite.

Table 12.3: Oracle Solutions Under its Business Suite

S.no. Solutions Description

1 Oracle Contracts Oracle Contracts automates the complete contract

lifecycle for multiple types of contracts. Oracle
Contracts provides a single view of your contracts
base to all departments .

2 Oracle Financials Oracle Financials is an integrated solution that gives

you complete visibility into your finances and control
over all transactions, while increasing the efficiency of
your operations.

3 Oracle Human Resources This solution readies your company to rapidly

Management System deploy the best resources for maximum employee
(HRMS) productivity, satisfaction, and retention.

4 Oracle Business Oracle business intelligence solutions help you

Intelligence meet the information needs of your users by providing
self-service, Web-based access to information. It
provides hundreds of pre-built reports and analytic
capabilities. Oracle addresses the full spectrum of
business intelligence requirements, such as data
quality, data analysis, and information access.

5 Oracle Learning Oracle Learning Management provides a

Management complete infrastructure that lets organizations manage,
deliver, and track training, in both online and
classroom environments.

6 Oracle Maintenance Oracle Maintenance Management helps you plan

Management and execute maintenance activity for any asset, as well
as keep track of information on asset costs and
activities throughout an enterprise.

7 Oracle Manufacturing Oracle Manufacturing is a set of collaborative

applications that optimize production capacity
beginning with raw materials through final products,
regardless of the manufacturing methodology used.

8 Oracle Marketing Oracle Marketing integrates with Sales, Finance and

the rest of your organization, for better planning and
execution. It drives profit by intelligently marketing to
the most profitable customers.

9 Oracle Order Oracle Order Management uses Oracle

Management Workflow to support tailored, automated fulfillment
processes, without the need for customization. It
captures demand from multiple channels using a
variety of communication methods.

9
Information Systems - II

10 Oracle Procurement Oracle Procurement is an integrated set of applications

that connects all your purchasing functions, including
sourcing, purchase order management, receiving, and
payables, to give you a central repository of
purchasing information, along with fully automated,
self-service capabilities.

11 Oracle Product Oracle Product Lifecycle Management is

Lifecycle Management collection of applications that gives you a centralized
repository of product and project information that will
help you manage product activities collaboratively.

12 Oracle Projects Oracle Projects, a set of Internet-enabled applications,

delivers centralized project management functionality
and serves as a bridge between operations and
corporate finance to help you effectively manage the
full lifecycle of every project.

13 Oracle Sales Oracle Sales enables you to have comprehensive

customer and prospect information so that your sales
organizations can meet challenging revenue goals with
fewer resources. .

14 Oracle Supply Oracle Supply Chain Management lets you gain

Chain Management global visibility, automate internal processes and
readily collaborate with your suppliers, customers, and
partners.

Source: http://www.oracle.com/

We will now have a look at the business solutions offered by Microsoft.

12.9 BUSINESS SOLUTIONS FROM MICROSOFT

Microsoft Business Solutions offers integrated business applications for small and
mid-sized organizations and divisions of large enterprises as well. It creates
applications and services for retailers, manufacturers, wholesale distributors, and
service companies.
Table 12.4: Microsoft’s Integrated Applications

S.no. Applications Description

1 Analytics Manage budgets, create and consolidate reports, and

look for trends and relationships in any part of your
business.

2 Portals Deliver access to the data, applications, and services

your employees, customers, and business partners
need via a Web browser, and see them work more
efficiently with you.

3 Customer Relationship Manage customer groups, create and launch

Management marketing campaigns, track customer activity, and
organize sales and after-sales.

4 E-commerce Let customers and suppliers do business with you

anytime through Web sites or by connecting their
system directly to yours.
10
Integrated Applications

5 Field Service Management Set up and manage service contracts, enter and track
service calls, view schedules, and optimize workloads
across resources.
6 Financial Management Control your general ledger, payables, receivables,
inventory, sales process, purchasing, fixed assets,
and cash flow. Perform reconciliation and collections.
7 HR Management Manage your human resources from mapping,
recruitment, and employee registration, to skills
development and processing of payroll and benefits.
8 Manufacturing Coordinate your entire manufacturing process from
product configuration and supply and capacity
requirements planning, to scheduling and shop floor.
9 Project Management Manage your resources, forecast your costs and
and Accounting budgets, track time and expenses, and organize
contracts and billing.
10 Retail Management Run retail operations from point-of-sale to delivery.
Increase customer flow, speed up lines and tasks,
control inventory, and automate purchasing.
11 Supply Chain Organize single or multiple site warehouses; handle
Management order promising, demand planning, and online
collaboration with suppliers.

(Source: http://www.microsoft.com/BusinessSolutions/Highlights/buyers_guide.mspx

Microsoft carries out these business applications with the help of its array of business
solutions like Microsoft Axapta® which offers solutions for analytics, CRM, e-
commerce, financial management, HRM, manufacturing, project management and
SCM; Microsoft Great Plains® which offers solutions for analytics, portals, field
service management, financial management, HRM, manufacturing, project
management and SCM; Microsoft Navision® which offers solutions for analytics,
portals, e-commerce, financial management, HRM, manufacturing, project
management and SCM and Microsoft Solomon® which offers solutions for analytics,
CRM, e-commerce, financial management, project management and SCM. The
figure given below highlights this.

11
Figure 12.6: Microsoft’s Business Solutions
Information Systems
Source: - II
http://www.microsoft.com/

Presented below is a systematic presentation of the integrated applications covered

by Microsoft and the business solutions it offers.

Table 12.5: Microsoft’s Integrated Applications and its Business Solutions

S.no. Application Solutions

1 Analytics Axapta, Enterprise reporting, Great Plains, Navision,

Solomon

2 Portals Great Plains, Navision Portal, Solomon, Enterprise Portal

3 Customer Relationship Axapta, Solomon, Field Service Management,

Management CRM, Outlook with Business Contact Manager

4 E-commerce Axapta, Great Plains, Navision, Solomon, Business

Network, Small Business Manager

5 Field Service Great Plains, Navision, Solomon

Management

6 Financial Management Great Plains, Navision, Solomon, Small Business

Manager, Axapta

7 HR Management Great Plains, Navision, Axapta

8 Manufacturing Great Plains, Navision, Axapta

9 Project Management Great Plains, Navision, Axapta, Solomon

and Accounting

11 Supply Chain Great Plains, Navision, Solomon, Small Business

Management Manager, Axapta, Business network

Source:http://www.microsoft.com/

So, you can see that there is a solution for virtually every thing that your business
needs. All the information that is given in the preceding sections is an attempt to
highlight the issue that there are solutions aplenty and the need is to use them
effectively to gain business advantage.

Activity B
Go to the websites of Oracle and SAP, list down five business advantages or
competitive edge that their customers achieved after the implementation of their
business solution.

.............................................................................................................................

.............................................................................................................................
12
Integrated Applications
.............................................................................................................................

.............................................................................................................................

12.10 SUMMARY

Today’s business faces a number of technology related problems. They are often run
on separate software for each of their business processes like accounts, payroll,
office suites etc. Supporting computers often takes their productive time and hence
affects the business productivity as the employees are left with less time for doing
their primary jobs. This is the reason why businesses need products that are easy to
learn and use. Integration of business solutions emerges as an important tool here.
They connect your customers, suppliers and employees. Thus it works for your whole
business and not just one department. The unit has tried to explain the concepts of
integration and has highlighted the solutions, which are available in the market today.

12.11 UNIT END EXERCISES

1) What are the technology related challenges that are invisible to your organization?
Highlight the pitfalls? How integrated software applications can help in this?
2) What are integrated software applications? Talk about their advantages and
business utility.
3) Write notes on the business software solutions provided by
a) SAP
b) PeopleSoft
c) Oracle
d) Microsoft
4. Compare the Business solutions provided by Microsoft and SAP. Is the rivalry
justified? Clearly highlight the features which are common between the two.

12.12 REFERENCE AND SUGGESTED FURTHER

READINGS

http://www.microsoft.com/businesssolutions/default.mspx for information about

Microsoft business solutions.

http://www.oracle.com/applications/index.html?content.html for information about

Oracle Business Suite.

http://www.peoplesoft.com/corp/en/products/ent/index.jsp for information about

PeopleSoft Solutions.

http://www.sap.com/ for information about SAP Business Solutions.

13
Computer Programming
UNIT 13: BUILDING INFORMATION and Languages

SYSTEMS

Structure
13.1 Introduction
13.2 Objectives
13.3 Computer Based Information Systems and its Classification
13.3.1 Office Automation Systems
13.3.2 Communication Systems
13.3.3 Transaction Processing Systems
13.3.4 Enterprise Information Systems
13.3.5 Decision Support Systems
13.3.6 Execution Systems
13.3.7 Going Beyond the Information System Categories
13.4 Redesigning the Organisation with Information Systems
13.5 Business Values of Information Systems
13.6 Outsourcing Information System
13.6.1 Advantages and Disadvantages of Outsourcing
13.6.2 When to Use Outsourcing?
13.7 Ensuring Quality with Information System
13.8 Summary
13.9 Unit End Exercises
13.10 References and Suggested Further Readings

13.1 INTRODUCTION

An Information system is a set of people, procedures, and resources that collects,

transforms, and disseminates information in an organization. Today’s end users rely
on many types of Information Systems (IS). Some are simple manual information
systems, where people use tools such as pencils and paper, or machines such as
calculators and typewriters. Others are computer-based information systems.
However, in this unit, we will concentrate on computer-based information
systems that use hardware, software, telecommunications, and other forms of
Information Technology (IT) to transform data resources into a variety of
information products. Four kinds of organizational changes are enabled by
Information systems. These are automation, rationalization, re-engineering, and
paradigm shift. When an organization does not use its internal resources to build
and operate information system it takes help of other organizations to provide these
services. This is called outsourcing. There are advantages and disadvantages of
using outsourcing. Quality programs differ greatly from company to company.
Some are merely generalized “sales” campaigns intended to sensitize employees to
the need to strive for more quality in their daily work. At the opposite extreme,
quality programs can result in fundamental changes in the way a company does its
business. Companies also follow different routes in achieving quality. Whatever
route a company selects, the more it tries to achieve with its quality programs, the
more information systems can contribute the success of those programs.
1
System Analysis and
Computer Languages 13.2 OBJECTIVES

After reading this unit, you should be able to:

• Identify different types of Information system;
• Explain the impact of Information System on doing business;
• Describe about planned organizational change;
• Understand the business values of Information System;
• Enumerate the advantages and disadvantages of outsourcing Information
System; and
• Discuss how IS can be used to ensure quality.

13.3 COMPUTER BASED INFORMATION SYSTEMS

AND ITS CLASSIFICATION

A computer based information system uses the resources of people (end users and IS
specialists), hardware (machines and media), and software (programs and
procedures), to perform input, processing, output, storage, and control activities that
convert data resources into information products as shown in Figure 13.1.

People Resources: End Users and IS Specialists

Software Resources: Programs and Procedures

Control of System Performance
Hardware Resources and Media

Input of Data Processing Out of

Resources Data into Information
Information Products

Storage of Data Resources

Data Resources: Data, Model and Knowledge Bases

Fig. 13.1: The Components of an Information System

Source: James A, O’Brien, Introduction to Information System, 1995

Before going into the details of Computer based Information System. Let us first
discuss about a system. A system is a group of interrelated components working
together toward a common goal by accepting inputs and producing outputs through an
organized transformation process.
Such a system (sometimes called a dynamic system) has three basic interacting
components or functions:
• Input involves capturing and assembling elements that enter the system to be
processed. For example, raw materials, energy, data, and human effort must
2
be secured and organized for processing.
• Processing involves transformation processes that convert input into output. Computer Programming
Examples are a manufacturing process or mathematical calculations. and Languages

• Output involves transferring elements that have been produced by a

transformation process to their ultimate destination. For example, finished
products, human services, and management information must be transmitted to
their human users.
The systems concept can be made even more useful by including two additional
components: feedback and control. A system with feedback and control components
is sometimes called a cybernetic system, that is, a self-monitoring, self-regulating
system.
• Feedback is data about the performance of a system. For example, data about
sales performance is feedback to a sales manager.
• Control involves monitoring and evaluating feedback to determine whether a
system is moving toward the achievement of its goal. The control function
then makes necessary adjustments to a system’s input and processing
components to ensure that it produces proper output. For example, a sales
manager exercises control when he or she reassigns salespersons to new
territories after evaluating feedback about their sales performance.
This information system model highlights the relationships among the components and
activities of information systems. It provides a framework that emphasizes four
major concepts that can be applied to all types of information systems:
• People, hardware, software, and data are the four basic resources of
information systems.
• People resources include end users and IS specialists, hardware resources
consist of machines and media, software resources include both programs and
procedures, and data resources can include data, model, and knowledge bases.
• Data resources are transformed by information processing activities into a
variety of information products for end users.
• Information processing consists of input, processing, output, storage, and
control activities.
Basic IS model shown in the given in Table 13.1. The table indicates that a computer
based information system consists of four major resources: people, hardware,
software, and data.

Table 13.1: Different Resources of Information Systems

People Resources:
Specialists – systems analysts, programmers, and computer operators.
End users – anyone else who uses information systems.
Hardware Resources:
Machines – computers, video monitors, magnetic disk drives, printers, and optical scanners.
Media – floppy disks, magnetic tape, optical disks, plastic cards, and paper forms.
Software Resources:
Programs – operating system programs, spreadsheet programs, word processing
programs, and payroll programs.
Procedures – data entry procedures, error correction procedures, and paycheck distribution
procedures.
Data Resources:
Product descriptions, customer records, employee files, and inventory databases.
Information Products:
Management reports and business documents using text and graphics displays, audio
responses, and paper forms.
3
System Analysis and There are many kinds of information systems in the real world. All of them use
Computer Languages hardware, software, and people resources to transform data resources into
information products.

It is important not to confuse information systems with the concept of computer

systems. A computer system is a group of interconnected hardware components that
may take the form of a microcomputer, minicomputer, or large mainframe computer
system. However, whether it sits on a desk or is one of many computers in a
telecommunications network, a computer system still represents only the hardware
resources component of a computer-based information system. As we have just
seen, an information system also consists of people, software, and data resources.

Types of Information System

Although people often think of information systems as tools for decision-making, each
type of information system supports both communication and decision-making in a
number of ways.

Table 13.2: Typical Ways Each Type of Information System Supports Communication
and Decision Making

System Type Typical User Impact on Communication Impact on Decision

Making
Office Automation * Anyone who * provide tools for creating * Provides
system: provides stores personal documents and spreadsheets and
individuals data, creates presentations, such as other tools for
effective ways to documents, or work processors and analyzing
process personal performs presentation systems. information
and organizational calculation.
business data, to * Communication
perform tools also help in
calculations, and to implementing
create documents decisions.

Communication * Anyone who * Telephones and

System: communicates * Telephones and
teleconferencing for
Helps people work with others, teleconferencing
communication
together by sharing including office for decision
information in many * E-mail, v-mail, fax, for making
workers,
different forms communicating using
managers, and * E-mail, v-mail, fax,
messages and documents
professions other tools for
* Access to memos and obtaining
other shared information information
* Scheduling meetings * Supports sharing
* Controlling flow of work information
related to making
joint decisions

* People whose * Gives immediate

Transaction * Creates a database that
work involves feedback on
Processing can be accessed directly,
performing decisions made
System (TPS): thereby making some
transactions while processing
collects and stores person-to-person
transactions
information about communication
transactions; unnecessary * Provides
controls some information for
aspects of planning and
transactions management
decisions

4
Computer Programming
* Managers, * Provides a basis of facts * Provides and Languages
Management
executives, rather than opinions for summary
information
and people explaining problems and information
system (MIS)
who receive their solutions and measures
and executive
feedback * May incorporate e-mail and of performance
information
about their other communication for monitoring
system (EIS):
work methods with presentation results
Converts TPS
data into of computerized data * May provide
information for easy ways to
monitoring analyze the
performance and types of
managing an information
organization; provided in
provides less flexible
executives form by older
information in a MIS
readily
accessible
interactive
format

Decision * Analysis * Analysis using DSS helps * Provides tools

support system managers provide a clear rationale for for analyzing
(DSS): and other explaining a decision data and
Helps people professionals building
make decisions models
by providing
information, * Analysis using
models, or a DSS helps
analysis tools define and
evaluate
alternatives

Execution * People who * May support

system: Directly do an communication or * May provide
supports the organization’s information sharing tools,
organization’s value added between people doing information, or
value added work, different parts of the task structured
work (e.g., helps especially if methods for
* May help explain the result
sales people that work making
of the task to customers
involves decisions
special skills
or * May store and
knowledge provide expert
knowledge to
support
decisions in
specific areas

One of the reasons the various categories are mentioned frequently is that each is used in
every functional area of business.

5
System Analysis and
Computer Languages Table 13.3: Examples of Each Type of Information System in three Functional Areas of
Business

System Type Sales Examples Manufacturing Finance Examples

Examples
Office * Spreadsheet to analyze * preadsheet to analyze a * preadsheet to compare
automation different possible prices production schedule several loan arrangements.
systems * Word processor to * Word processor to write a * Word processor to write a
create sales contract memo about how to fix a memo about new financial
machine procedures

* E-mail and fax used to * E-mail and v-mail to discuss * V-mail and fax to
Communication contact customer a problem with a new communicate with bank
Systems * Video conference to machine about loan arrangements
present new sales * Video-conference to * Video conference to explain
materials to sales force coordinate, manufacturing effect of financing on
* Work flow system to and sales efforts factory investments
make sure all sales steps * Work flow system to make * Work flow system to make
are completed sure engineering changes sure invoice approval
* System to coordinate all are approved precedes payment
work on a complex sales * System for exchanging the
contract latest information related
to lawsuit

Transaction * Point of sale system for * Tracking movement of work * Processing credit card
Processing sales transactions payments
in process in a factory
System (TPS) * Keeping track of cus- * Tracking receipts of * Payment of stock dividends
tomer contacts during a materials from suppliers and bond interest
sales cycle

Management * Weekly sales report by * Weekly production report * Receivables report showing
Information product and region by production and invoices and payments
System (MIS) * Consolidation of sales operation * Monthly financial plan
and Executive projections by product * Determination of planned consolidation
Information and region purchases based on a
System (EIS) * Flexible access to corporate
* Flexible access to sales production schedule financial plan by line item
data by product and * Flexible access to
region production data by product
and operation

Decision * System helping * System displaying current * System analyzing

Support insurance salespeople priorities for machine characteristics of customers
System (DSS) test alternatives operator who pay bills promptly
* Marketing data and * Production data and models * Stock database and models
models to analyze sales to analyze production results to help in selecting stocks
* Use of a GDSS to identify to buy or sell
production problems

Execution * System to generate * System to diagnose * System to support a loan

System competitive bids machine failures approval process

* System to help * System to transfer customer * System to find price

salespeople suggest the requirements to an auto- inconsistencies between
best choice for the mated machine cell different equity markets.
customer

6
Activity A Computer Programming
and Languages
List down the major business activities of your organization. Describe what kind of
information systems are already being used for these activities. Also suggest some
applications of information systems in the activities that are still done manually.

.............................................................................................................................

13.3.1 Office Automation Systems

An office automation system (OAS) facilitates everyday information processing tasks
in offices and business organizations. These systems include a wide range of tools
such as spreadsheets, word processors, and presentation packages. Although
telephones, e-mail, v-mail, and fax can be included in this category, we will treat
communication systems as a separate category.

OASs help people perform personal recordkeeping, writing, and calculation chores
efficiently. Of all the system types, OASs and communication systems are the most
familiar to students. Tools generally grouped within the OAS category include:

Spreadsheets are an efficient method for performing calculations that can be

visualized in terms of the cells of a spreadsheet. Although spreadsheet programs
seem second nature today, the first spreadsheet program was VisiCalc, which helped
create the demand for the first personal computers in the late 1970s.

Text and image processing systems store, revise, and print documents containing text
or image data. These systems started with simple work processor but have evolved
to include desktop publishing systems for creating complex documents ranging from
brochures to book chapters.

Presentation packages help managers develop presentations independently, instead of

working with typists and technical artists. These products automatically convert
outlines into printed pages containing appropriately spaced titles and subtitles. These
pages can be copied directly onto transparencies or slides used in presentations.

Personal database systems and note-taking systems help people keep track of their
own personal data (rather than the organization’s shared data.) Typical applications
include an appointment book and calendar, a to do list, and a notepad.

When using these tools for personal productivity purposes, users can apply any
approach they want because the work is unstructured. In these situations, some
individuals use them extensively and enjoy major efficiency benefits, whereas others
do not use them at all. The same tools can also be used for broader purposes;
however, in which they are incorporated into larger systems that organizations use to
structure and routinize tasks. For example, a corporate planning system may require
each department manager to fill in and forward a pre-formatted spreadsheet whose
uniformity will facilitate the corporations planning process. 7
System Analysis and 13.3.2 Communication Systems
Computer Languages
Electronic communication systems help people work together by exchanging or
sharing information in many different forms. New communication capabilities have
changed the way many businesses operate by making it possible to do many things at
a distance that previously required being present in a specific location. This section
groups these tools into four general categories. Teleconferencing systems make it
possible to hold same-time, different-place meetings. Messaging systems make it
possible to transmit specific messages to specific individuals or groups of individuals.
Groupware systems start with messaging but go further by facilitating access to
documents and controlling team-related workflow. Knowledge management systems
facilitate the sharing of knowledge rather than just information.

Teleconferencing

The use of electronic transmission to permit same-time, different-place meetings is

called teleconferencing. We can think of a traditional telephone call as a minimal
teleconference, but the term is normally applied to other options including audio
conferencing, audio graphic conferencing, and video conferencing.

The distinction between these approaches is related to the type of information that is
shared. Audio conferencing is a single telephone call involving three or more people
participating from at least two locations. If several people on the call are in the same
office, they can all participate using a speakerphone, which includes a high-sensitivity
microphone and a loudspeaker that can be heard by anyone in a room. Audio graphic
conferencing is an extension of audio conferencing permitting dispersed participants
to see pictures or graphical material at the same time. This is especially useful when
the purpose of the meeting is to share information that is difficult to describe,
organize, or visualize, such as a spreadsheet or model used to perform calculations
under different assumptions. Video conferencing is an interactive meeting involving
two or more groups of people who can see each other using television screens. The
least expensive forms of video conferencing are tiny cameras and 4-inch screens add
to telephones or separate video conferencing windows displayed on computer
screens. In typical business video conferencing, remote participants appear on a
television screen.

Video conferencing simulates a face-to-face meeting without requiring unnecessary

travel, which absorbs time and energy, not to speak of the cost of airplane and hotel
bills. However, the effectiveness of videoconferences decreases if the participants
lack a prior social bond. For example, doing sales calls via videoconference might
seem tempting but might not foster the personal relationship needed to succeed in
many sales situations. On the other hand, Citibank and other banks have begun to
experiment with stripped-down branch offices that have no tellers but permit
customers to open accounts by video conferencing with multilingual staffers in
another state.

Messaging Systems

Different-time, different-place communication has been used for centuries in the

form of books and letters. Messaging system make it possible to transmit specific
messages to specific individuals or groups of individuals. They use technologies such
as electronic mail, voice mail, and fax to make different-time, different-place
communication more effective.

The use of computers to send and retrieve text messages or document addressed to
individual people or locations is called electronic mail (e-mail). Each user is identified
by is usually based on the person’s name and also serves as the person’s e-mail
8
address. The sender uses a word processor to create a message and then addresses Computer Programming
it to a distribution list. The distribution list might be an individual account name or a and Languages
group of names, such as those for the sales department or everyone working on a
particular project. The recipient can read the message immediately or can wait until
it is convenient. The recipient e-mail message can save it, print it, erase it, or
forward it to someone else. The recipient can also edit the message to extract parts
to be saved, printed, or passed on.

E-mail is effective in many situations, such as permitting you to leave a message

without going through an additional person who might garble it. With e-mail you can
send a message to a person traveling away from the office who can log onto a
network using a laptop computer. If you are working on a memo or other document
and want to get feedback from someone before you distribute it, you can use e-mail
to send it to the person for a quick response. E-mail also allows you to send the
same message to many individuals without having to contact them individually. For
example, a product designer can responds with a good idea, the minimal effort of
distributing the request is worth it.

There have been many innovative uses of e-mail to improve communication. People
in large organizations have used it to bypass bureaucratic structures. For example,
top managers sometimes bypass intermediate management levels by obtaining
specific information directly from people throughout the organization. Some
organizations have replaced the majority of their formal memos with informal e-mail
that gets to the pont directly. As happened at IBM’s Europe headquarters in Paris,
e-mail has also been used as a communication tool fro people who are not fluent in
the language in which business is conducted. E-mail removes accents and permits
non-fluent speakers to read a message several times that otherwise might be
misunderstood in a phone conversation. It also helps them express their ideas more
effectively than they might by using a telephone.

Groupware

A relatively new and still somewhat unshaped category, groupware helps teams work
together by sharing information and by controlling internal workflows. Coined in the
late 1980s the term groupware has attained wide recognition due to the increasing
need for groups to work together more effectively at a distance as a result of
downsizing and rapid organizational change. Products viewed as groupware are still
new enough that their long-term direction is unclear even though the competitive need
to work effectively in dispersed teams is greater than ever.
Groupware goes beyond messaging by facilitative access to documents and
controlling team-related workflow. Many groupware products are related to specific
group related tasks such as project management, scheduling meetings
(“calendaring”), and retrieving data from shared databases. Lotus Notes, a
prominent product in this category, is designed for sharing text and images and
contains a data structure that is a cross between a table-oriented database and an
outline. For example, a law firm in Seattle uses Lotus Notes to permit everyone
working on a particular case to have access to the most current memos and other
information about that case, even if they are traveling. Other companies use Lotus
Notes to store and revise product information for salespeople selling industrial
products, thereby replacing the massive three-ring binders they formerly lugged
around.
Yet other groupware functions are performed through computer conferencing, the
exchange of text messages typed into computers from various locations to discuss a
particular issue. When done through the Internet this is sometimes called a
newsgroup. A computer conference permits people in dispersed locations to combine
their ideas in useful ways even though they cannot speak to each other face-to-face.
Any conference participant may be able to add new ideas, attach comments to 9
System Analysis and existing messages, or direct comments to specific individuals or groups. Proponents
Computer Languages of computer conferencing recognize some disadvantages or working through
computers but emphasize major advantages, such as preventing a single forceful
individual from dominating a meeting. Also, because everything is done through a
computer, a record of how ideas developed is automatically generated.

A different type of groupware product focuses primarily on the flow of work in office
settings. These products provide tools for structuring the process by which
information for a particular multi-step task is managed, transferred, and routed. A
typical example is the approval of travel expenditure. In this case, one person must
propose the expenditure and someone else must approve it. The workflow
application is set up to make the approval process simple and complete. In effect,
groupware is being used as a small transaction processing system for multistep
transaction.

Intranets and Extranets

The widespread use of the World Wide Web has led many firms to apply the
information sharing concepts of groupware on a much larger scale by creating an
additional type of communication system, intranets and extranets. Intranets are
private communication networks that use the type of interface popularized by the
Web but are accessible only by authorized employees, contractors, and customers.
They are typically used to communicate nonsensitive but broadly useful information
such as recent corporate news, general product information, employee manuals,
corporate policies, telephone directories, details of health insurance and other
employee benefits, and calendars. In some cases employees can use intranets to
access and change their personal choices regarding health insurance and other
benefits. Once security issues are addressed adequately, intranets for accessing
general-purpose corporate data may lead to widespread use of intranets as a front
end to transaction processing systems and management information systems
described in the following sections.

Extranets are private networks that operate similarly to intranets but are directed at
customers rather than at employees. Extranets provide information customers’ need,
such as detailed product descriptions, frequently asked questions about different
products, maintenance information, warranties, and how to contact customer service
and sales offices. Much of this information was formerly difficult for customers to
access because paper versions of it at the customer site became scattered and
outdated. By using extranets, companies are making this type of information
increasingly available at a single interactive site that is easy to navigate.

Knowledge Management

A final type of communication system is very different from systems that support real
time communication or provide access to information. Today’s leading businesses are
increasingly aware that their employees’ knowledge is one of their primary assets. In
consulting companies and other organizations that rely heavily on unique
competencies and methods, knowledge has more competitive significance than
physical assets because the physical assets can be replaced or replenished more
easily.

Knowledge management systems are communication systems designed to facilitate

the sharing of knowledge rather than just information. As with groupware, the idea
of knowledge management is still emerging and is applied in many different ways in
different firms. The computer applications underlying knowledge management
systems are often built on technologies such as intranets, electronic mail, groupware,
databases, and search engines. Functions supported by these technologies include
10
codifying knowledge (such as best practices), organizing it in repositories for later Computer Programming
access, finding knowledge (using search engines and other schemes), and providing and Languages
organized ways to find people who have needed knowledge.

The human element is paramount in knowledge management. The companies with

the best results to date stitch technologies together into a system that operates
effectively and that is genuinely supported by the culture. For example, employee
reviews in many consulting companies give significant weight to demonstrated
contribution to internal knowledge management systems. This type of recognition is
especially important if the firm’s culture otherwise encourages hoarding of knowledge
for personal advancement. In many cases, the most effective use of knowledge
requires involvement of the person who is the expert. When a British Petroleum
drilling ship in the North Sea encountered an equipment failure, it put the equipment in
front of a video camera and used a satellite link to contact a drilling expert in
Scotland. His rapid diagnosis of the problem prevented delays and a possible
shutdown.

13.3.3 Transaction Processing Systems

A transaction processing system (TPS) collects and stores data about transactions
and sometimes controls decisions made as part of a transaction. A transaction is a
business event that generates or modifies data stores in an information system. TPSs
were the first computerized information systems. We encounter computerized TPSs
frequently, including every time we write a cheque, use a credit card, or pay a bill
sent by a company. A TPS used to record a sale and generate a receipt is primarily
concerned with collecting and storing data. If the TPS validates a credit card or
helps a clerk determine whether to accept a personal check, it also controls decisions
made within the transaction.

TPSs are designed based on detailed specifications for how the transaction should be
performed and how to control the collection of specific data in specific data formats
and in accordance with rules, polices, and goals of the organization. Most contain
enough structure to enforce rules and procedures for work done by clerks or
customer service agents. Some TPSs bypass clerks and totally automate
transactions; such as the way ATMs automate deposits and cash with drawls. A
well-designed TPS checks each transaction for easily detectable errors such as
missing data, data values that are obviously too high or too low, data values that are
inconsistent with other data in the database and data in the wrong format. It may
check for required authorizations for the transaction. Certain TPSs such as airline
reservation systems may automate decision-making functions such as finding the
flight that best meets the customer’s needs. Finally, when all the information for the
transaction has been collected and validated, the TPS stores it in a standard format
for later access by others.

As anyone knows who has tried to make a reservation when a computerized

reservation system is down, organizations rely heavily on their TPSs. Breakdowns
disrupt operations and may even bring business to a complete halt. As a result, a
well-designed TPS has backup and recovery procedures that minimize disruptions
resulting from computer outages.

Batch versus Real Time Processing

The two types of transaction processing are batch and real time processing. With
batch processing, information for individual transaction is gathered and stored but
isn’t processed immediately. Later, either on a schedule or when a sufficient number

11
System Analysis and of transactions have accumulated, the transactions are processed to update the
Computer Languages database. With real time processing, each transaction is processed immediately.
The person providing the information is typically available to he4lp with error
correction and receives confirmation of transaction completion. Batch processing
was the only feasible form of transaction processing when data were stored only on
punched cards or tapes. Real time transaction processing requires immediate access
to an online database.

Batch processing is currently used in some situation where the transaction data
comes in on paper, such as in processing cheques and airline ticket stubs. A batch
approach is also used for generating paychecks and other forms of paper output that
will be distributed after a delay. Unfortunately time delays inherent in batch
processing may cause significant disadvantages. The central database may never be
completely current because of transactions received while the batch was being
processed. Worse yet, batching the transactions creates built-in delays, with
transactions not completed until the next day in some cases. Even systems with
interactive user interfaces may include lengthy delays before transactions are
completed. For example, weekend deposits into many ATMs are not posted to the
depositor’s account until Monday. Even though the ATM’s user interface is
interactive, the system in a larger sense doesn’t perform real time processing.

Compared to batch processing, real time processing has more stringent requirements
for computer response and computer uptime. As is obvious when a travel agent
says “Sorry, the computer is down,” the jobs and work methods of the people in the
real time TPS are designed under the assumption that the system will be up and
available.

13.3.4 Enterprise Information Systems

Many firms have tried to take transaction processing to a higher level by creating
enterprise information systems that encompass the transaction processing done in the
various functional silos. The idea of these efforts is to create unified databases that
permit any authorized individual to obtain whatever information would be helpful in
making decisions across the organization. In theory at least, having all this
information in a unified database should improve decision-making. Enterprise
information systems are quite controversial because the effort to create them is
enormous. They involve much more than changing the format of databases. Often it
is necessary to change business processes to suit the needs of the information system
instead of vice versa. Nonetheless, many organizations have found that the
integration resulting from this large investment seems to be worthwhile. The last part
of this discussion explains why these information systems are usually called
enterprise resource planning (ERP) systems even though planning is not their main
focus.

Management and Executive Information Systems

A management information system (MIS) provides information for an organization’s

managers. The idea of MIS predates the computer age. For example, as long ago as
the middle 1500s, the Fogger family in Augsberg, Germany, had business interests
throughout Europe and even into China and Peru. To keep in touch, they set up a
worldwide news reporting service through which their agents wrote letters about
critical political and economic events in their areas of responsibility. These letters
were collected, interpreted, analyzed, and summarized in Augsberg and answered
through instructions sent to the family’s agents. This paper-based system
encompassing planning, execution, and control helped the family move more rapidly in
the mercantile world than their rivals. Instructions went out to the agents; the agents
executed their work’ and the agents reported their results.
12
Computerized MIS generates information for monitoring performance, maintaining Computer Programming
coordination, and providing background information about the organization’s and Languages
operation. Users include both managers and the employees who receive feedback
about performance indicators such as productivity.

The concept of MIS emerged partly as a response to the shortcomings of the first
computerized TPSs, which often improved transaction processing but provided little
information for management. Computerized MISs typically extract and summarize
data from TPSs to allow managers to monitor and direct the organization and to
provide employees accurate feedback about easily measured aspects of their work.
For example, a listing of every sale during a day or week would be extremely difficult
to use in monitoring a hardware store’s performance. However, the same data could
be summarized in measures of performance, such as total sales for each type of item,
for each salesperson, and for each hour of the day. The transaction data remains
indispensable, and the MIS focuses it for management.

As part of an organization’s formal control mechanisms, an MIS provides some

structure for the comparatively unstructured task of management by identifying
important measures of performance. The fact that everyone knows how
performance is measured helps in making decisions and helps managers motivate
workers.

From MIS to EIS

An executive information system (EIS) is a highly interactive system that provides

managers and executives’ flexible access to information for monitoring operating
results and general business conditions. These systems are sometimes called
executive support systems (ESS). EIS attempts to take over where the traditional
MIS approach falls short. Although sometimes acceptable for monitoring the same
indicators over time, the traditional MIS approach of providing prespecified reports on
a scheduled basis is too inflexible for many questions executives really care about,
such as understanding problems and new situations.

EISs provide executives with internal and competitive information through user-
friendly interfaces that can be used by someone with little computer-related
knowledge. EISs are designed to help executives find the information they need
whenever they need it and in whatever form is most useful. Typically, users can
choose among numerous tabilar or graphical formats. They can also control the level
of detail, the triggers for exception conditions, and other aspects of the information
displayed. Most EISs focus on providing executives with the background information
they need, as well as help in understanding the causes of exceptions and surprises.
This leaves executives better prepared to discuss issues with their subordinates.

13.3.5 Decision Support Systems

A decision support system (DSS) is an interactive information system that provides
information, models and data manipulation tools to help make decisions in semi
structured and unstructured situations where no one knows exactly how the decision
should be made. The traditional DSS approach includes interactive problem solving
direct use of models, and user-controllable methods for displaying and analyzing data
and in formulating and evaluating alternative decisions. This approach grew out of
dissatisfaction with the traditional limitations of TPS and MIS. TPS focused on
record keeping and control of repetitive clerical processes. MIS provided reports for
management but were often inflexible and unable to produce the information in a
form in which managers could use it effectively. In contrast, DSSs were intended to
support managers and professionals doing largely analytical work in less structured
situation with unclear criteria for success. DSSs are typically designed to solve the
structured parts of the problem and help isolate places where judgment and
13
experience are required.
System Analysis and DSSs may report repetitive or non-repetitive decision-making. They support repetitive
Computer Languages decision making by defining procedures and formats, but they still permit the users to
decide how and when to use the system’s capabilities. They support non-repetitive
decision making by providing data, models and interface methods that can be used
however the user wants. The broad spectrum of information systems with the DSS
label range from general tools such as spreadsheets, data analysis, and graphics
packages to highly customized simulation or optimization models focusing on a
specific business situation.

OLAP and Data Mining

The use of online data analysis tools to explore large databases of transaction data is
called online analytical processing (OLAP). The idea of OLAP grew out of
difficulties analyzing the data in databases that were being updated continually by
online transaction processing systems. When the analytical processes accessed large
slices of the transaction database, they slowed down transaction processing critical to
customer relationships. The salutation was periodic downloads of data from the
active transaction processing database into a separate database designed specifically
to support analysis work. The separate database often resides on a different
computer, which together with its specialized software is called a data warehouse.
Downloading data to a data warehouse makes it possible to perform both transaction
processing and analytical processing efficiently without mutual interference.

Data mining is the use of data analysis tools to try to find the patterns in large
transaction databases such as the customer receipts generated in a large sample of
grocery stores across the United States. Careful analysis of this data might reveal
patterns that could be used for marketing promotions, such as a correlation between
diaper sales and beer sales during the evening hours.

13.3.6 Execution Systems

The information system categories discussed so far are primarily oriented toward
planning and control activities or toward general office and communication activities.
What about systems designed to directly support people doing the value added work
that customers care about, such as practicing medicine, designing buildings, or selling
investments? Some people call these systems “functional area systems”. Because
there is no generally accepted term form information systems that support value
added work, we will call them execution systems. These systems have become
much more important in the last decade as advances in computer speed, memory
capacity, and portability made it increasingly possible to use computerized systems
directly while doing value added work. Such systems help plastic surgeons design
operation and show the likely results to their patients help lawyers find precedents
relevant to lawsuits, and help maintenance engineers keep machines running.

Expert systems are a type of execution system that has received attention as an
offshoot of artificial intelligence research. An expert system supports the intellectual
work of professionals engaged in design, diagnosis, or evaluation of complex
situations requiring expert knowledge in a well-defined area. Expert systems have
been used to diagnose diseases, configure computers, analyze chemicals, interpret
geological data, and support many other problem solving processes. This type of
work requires expert knowledge of the process of performing particular tasks.
Although these tasks may have some repetitive elements, many situations have
unique characteristics that must be considered based on expert knowledge.
Intellectual work even in narrowly defined areas is typically much less repetitive than
transaction processing general office work.

14
13.3.7 Going Beyond the Information System Categories Computer Programming
and Languages
The field of IT moves so rapidly that terminology often fails to keep pace with
innovation. The same problem occurs with information system classification. People
identify a new type of system, such as DSS or EIS, and describe its characteristics
are no longer as important or have become commonplace. Eventually many
information systems contain characteristics from several system categories.
Furthermore a system that fits in a category today may not fit once new features are
added. Information systems that contain characteristics of several different
categories can be called hybrid information systems.

In the mid-1990s the widespread adoption of a form of hybrid information system

called an enterprise resource planning (ERP) system became highly visible and
somewhat controversial. Resource planning actually describes only a small part of
why ERP systems exist. As with many IT terms, the term ERP evolved out of an
early form of DSS called material requirements planning (MRP). These systems
provide an integrated view necessary to coordinate purchasing and production
scheduling activities.

ERP systems try to create an integrated database that spans the major activities in a
company. Ideally, having production, sales, human resources, and finances data in the
same database should make it easier to analyze the business and to coordinate
decision-making. Software vendors such as SAP, Baan, People soft, and Oracle
currently sell ERP software. These vendors analyzed basic business processes such
as purchasing and of the process variations they found. This design strategy makes
their products enormously complicated. Just figuring out which of the many options
to use often takes several hundred person-months of time. In many situations,
departments must give up existing customized systems that address their unique
problems in order to use the more general software and its integrated database.

13.4 REDESIGNING THE ORGANIZATION WITH

INFORMATION SYSTEMS

One of the most important things to know about building a new information system is
that this process is one kind of planned organizational change. Frequently, new
systems mean new ways of doing business and working together. The nature of
tasks, the speed with which they must be completed, the nature of supervision (its
frequency and intensity), and who has what information about whom will all be
decided in the process of building an information system. This is especially true in
contemporary systems, which deeply affect many parts of the organization. System
builders must understand how a system will affect the organization as a whole,
focusing particularly on organizational conflict and changes in the locus of
decision-making. Builders must also consider how the nature of work groups will
change under the impact of the new system. Builders determine how much change
is needed.

New information systems can be powerful instruments for organizational change;

Figure 13.3 shows that there are four kinds of structural organizational change which
are enabled by information technology: automation, rationalization, re-engineering, and
paradigm shifts. Each carries different rewards and risks.

The most common form of IT-enabled organizational change is automation. The first
applications of information technology involved assisting employees perform their
tasks more efficiently and effectively. Calculating paychecks and payroll registers,
giving bank teller’s instant access to customer deposit records, and developing a
nationwide network of airline reservation terminals for airline reservation agents are
15
all examples of early automation. Automation is akin to putting a larger motor in an
existing automobile.
System Analysis and
Computer Languages

High

Paradigm Shifts
Risk
Re-engieering

Rationalization

Low
Automation

Low High
Return

Fig. 13.2: Organizational Change carries Risk and Rewards

Source: Kenneth C Laudon, Jane P Laudon, Prentice Hall India, 1996

A deeper form of organizational change – one that follows quickly from early
automation – is rationalization procedure. Automation frequently reveals new
bottlenecks in production, and makes the existing arrangement of procedures and
structures painfully cumbersome. Rationalization of procedures is the streamlining of
standard operating procedures, eliminating obvious bottlenecks, so that automation
can make operating procedures more efficient.

A more powerful type of organization change is business re-engineering, in which

business processes are analyzed, simplified, and redesigned. Re-engineering involves
radically rethinking the flow of work; the business procedures used to produce
products and services with a mind of radically reduce the costs of business.
A business process is a set of logically related tasks performed to achieve a defined
business outcome. Some examples of business processes are developing a new
product, ordering goods from a supplier, or processing and paying an insurance claim.
Using information technology, organizations can rethink and streamline their business
processes to improve speed, service and quality. Business re-engineering reorganizes
workflows, combining steps to cut waste and eliminating repetitive, paper-intensive
tasks (sometimes the new design eliminates jobs as well). It is much more ambitious
than rationalization of procedures, requiring a new vision of how the process is to be
organized. Rationalizing procedures and redesigning business processes are limited to
specific parts of a business. New information systems can ultimately affect the
design of the entire organization by actually transforming how the organization carries
out its business or even the nature of the business itself.

This still more radical form of business change is called a paradigm shift.
A paradigm shift involves rethinking the nature of the business and the nature of the
organization itself. Banks, for instance, may decide not to automate, rationalize, or
reengineering the jobs of tellers. Instead they may decide to eliminate branch
banking altogether and seek less expensive source of funds, like international
borrowing. Retail customers may be forced to use the Internet to conduct all their
business, or a proprietary network. A paradigm shift is akin to rethinking not just the
automobile, but transportation itself.

16
Of course nothing is free. Paradigm shifts and re-engineering often fail because Computer Programming
extensive organization change is so difficult to orchestrate. Some experts believe that and Languages
70% of the time they fail. Why then do so many corporation entertain such radical
change, because the rewards are equally high. In many instances firms seeking
paradigm shifts and pursuing re-engineering strategies achieve stunning, order-of-
magnitude increases in their returns on investment (or productivity).

13.5 BUSINESS VALUES OF INFORMATION

SYSTEM

Another important fact about information systems is shown in Figure 13.3. No matter
how they may be classified, information systems have following business values in an
organization by supporting business operations, decision-making, and strategic
management:
• Support of business operations.
• Support of managerial decision-making.
• Support of strategic competitive advantage.

INFORMATION SYSTEMS

Support of
Strategic
Advantage

Support of
Managerial
Decison Making

Support of
Business Operations

Fig. 13.3: Business Values of Information System

Let’s take a retail store as an example to illustrate this important first point.
As a consumer, you have to deal regularly with information systems used to support
business operations at the many retail stores where you shop. For example, most
department stores use computer-based information systems to help them record
customer purchases, keep track of inventory, pay employees, buy new merchandise,
and evaluate sales trends. Store operations would grind to a halt without the support
of such information systems.

Information systems also help store managers make better decisions and attempt to
gain a strategic competitive advantage. For example, decisions on what lines of
clothing or appliances need to be added or discontinued, or what kind of investments
they require, are typically made after an analysis provided by computer-based
information systems.
17
System Analysis and This not only supports the decision making of store managers but also helps them look
Computer Languages for ways to gain an advantage over other retailers in the competition for customers.
For example, store managers might make a decision to invest in a computerized
touch-screen catalog ordering system as a strategic information system. This might
lure customers away from other stores, based on the ease of ordering merchandise
provided by such a computer-based information system. Thus, strategic information
helps provide strategic products and services that given an organization a
comparative advantage over its competitors.

13.6 OUTSOURCING INFORMATION SYSTEMS

If a firm does not want to use its own internal resources to build and operate
information systems, it can hire an external organization that specializes in providing
these services to do the work. The process of turning over an organization’s
computer central operations, telecommunications networks, or applications
development to external vendors of these services is called outsourcing.

Outsourcing information system is not a new phenomenon. Outsourcing options have

existed since the dawn of data processing. As early as 1963, Petrot’s Electronic
Data Systems (EDS) handled data processing services for Frito-Lay and Blue Cross.
Activities such as software programming, operation of large computers, time-sharing
and purchase of packaged software have to some extent been outsourced since the
1960s.

Because information systems play such a large role in contemporary organizations,

information technology now accounts for about half of most large firms’ capital
expenditure. In firms where the cost of information systems function has risen
rapidly, managers are seeking ways to control those costs and are treating
information technology as a capital investment instead of an operating cost of the
firm. One option for controlling these costs is to outsource.

13.6.1 Advantages and Disadvantages of Outsourcing

Outsourcing is becoming popular because some organization perceive it as being
more cost effective than it would be to maintain their own computer center and
information systems staff. The provider of outsourcing services can benefit from
economies of scale (the same knowledge, skills, and capacity can be shared with
many different customers) and is likely to charge competitive prices for information
systems services. Outsourcing allows a company with fluctuating needs for
computer processing to pay for only what it uses rather than to build its own
computer center to stand underutilized when there is no peak load. Some firms
outsource because their internal information systems staff cannot keep pace with
technological change. But not all organizations benefit from outsourcing, and the
disadvantages of outsourcing can create serious problems for organizations if they
are not well understood and managed.

Advantages of Outsourcing:

The most popular explanations for outsourcing are the following:

Economy: Outsourcing vendors are specialists in the information systems services

and technologies they provide. Through specialization and economies of scale, they
can deliver the same service and value for less money than the cost of an internal
organization.

18
Service Quality: Because outsourcing vendors will lose their clients if the service is Computer Programming
unsatisfactory, companies often have more leverage over external vendors than over and Languages
their own employees. The firm that out-sources may be able to obtain a higher level
of service from vendors for the same or lower costs.

Predicatability: An outsourcing contract with a fixed price for a specified level of

service reduces uncertainly of costs.

Flexibility: Business growth can be accommodated without making major changes

in the organization’s information systems infrastructure. As information technology
permeates the entire value chain of a business, outsourcing may provide superior
control of the business because its costs and capabilities can be adjusted to meet
changing needs.

Making Fixed Costs Variable: Some outsourcing agreements, such as running

payroll, are based on the price per unit of work done (such as the cost to process
each cheque). Many out-sources will take into account variations in transaction
processing volumes likely to occur during the year or over the course of the
outsourcing agreement. Clients only need to pay for the amount of services they
consume, as opposed to paying a fixed cost to maintain internal systems that are not
fully utilized.

Freeing up Human Resources for other Projects and Financial Capital:

Scarce and costly talent within an organization can refocus on activities with higher
value and payback than they would find in running a technology factory. Some
agreements with outsource include the sale for cash of the outsourced firm’s
technology capital assets to the vendor.

Disadvantages of Outsourcing

Not all organizations obtain these benefits from outsourcing. There are dangers in
placing the information systems functions outside the organization. Outsourcing can
create serious problems such as loss of control, vulnerability of strategic information,
and dependence on the fortunes of an external firm.

Loss of Control: When a firm farms out the responsibility for developing and
operating its information systems to another organization, it can lose control over its
information systems function. Outsourcing places the vendor in an advantageous
position where the client has to accept whatever the vendor does and whatever fees
the vendor charges. If a vendor becomes the firm’s only alternative for running and
developing its information systems, the client must accept whatever technologies the
vendor provides. This dependency could eventually result in higher costs or loss of
control over technological direction.

Vulnerability of Strategic Information: Trade secrets or proprietary information

may leak out to competitors because a firm’s information systems are being run or
developed by outsiders. This could be especially harmful if a firm allows an
outsourcer to develop or to operate applications that give it some type of competitive
advantage.

Dependency: The firm becomes dependent on the viability of the vendor. A vendor
with financial problems or deteriorating services may create severe problems for its
clients.
19
System Analysis and 13.6.2 When to Use Outsourcing?
Computer Languages
Since outsourcing has both benefits and liabilities and is not meant for all
organizations or all situations, managers should assess the role of information systems
in their organization before making an outsourcing decision. There are a number of
circumstances under which outsourcing makes a great deal of sense:
• When there is limited opportunity for the firm to distinguish itself competitively
through a particular information systems application or series of applications.
For instance, both the development and operation of payroll systems are
frequently outsourced to free the information systems staff to concentrate on
activities with a higher potential payoff, such as customer service or
manufacturing systems. Applications such as payroll or cafeteria accounting, for
which the firm obtains little competitive advantage from excellence, are strong
candidates for outsourcing. If carefully developed, applications such as airline
reservations or plant scheduling could provide a firm with a distinct advantage
over competitors. The firm could lose profits, customers, or market share if such
systems have problems. Applications where the rewards for excellence are high
and where the penalties for failure are high should probably be developed and
operated internally.
Companies may also continue to develop applications internally while outsourcing
their computer center operations when they do not need to distinguish themselves
competitively by performing their computer processing onsite.

When the predictability of uninterrupted information systems service is not very

important. For instance, airline reservations or catalog shopping systems are too
“critical” to be trusted outside. If these systems failed to operate for a few days or
even a few hours, they could close down the business. On the other hand, a system
to process employee insurance claims could be more easily outsourced because
uninterrupted processing of claims is not critical to the survival of the firm.

When outsourcing does not strip the company of the technical know-how required for
future information systems innovation. If a firm outsource some of its system but
maintains its own internal information systems staff, it should ensure that its staff
remains technically up to date and has the expertise to develop future applications.

When the firm’s existing information systems capabilities are limited, ineffective, or
technically inferior. Some organizations use outsourcers as an easy way to revamp
their information systems technology. For instance, they might use an outsourcer to
help them make the transition from traditional mainframe-based computing to a new
information architecture – distributed computing environment.

Despite the conventional wisdom on when to outsource, companies sometimes do

outsource strategic functions. In any case, if systems development and the
information systems function are well managed and productive, there may not be
much immediate benefit that can be provided by an external vendor.

Managing Outsourcing

To obtain value from outsourcing, organizations need to make sure the process is
properly managed. With sound business analysis and an understanding of
outsourcing’s strengths and limitations, managers can identify the most appropriate
applications to outsource and develop a workable outsourcing plan.

Segmenting the firm’s range of information systems activities into pieces that
potentially can be outsourced makes the problem more manageable and also helps
companies match an outsourcer with the appropriate job. Noncritical applications are
20 usually the most appropriate candidates for outsourcing. Firms should identify
mission-critical applications and mission-critical human resources required to develop Computer Programming
and manage these applications. This would allow the firm to retain its most highly and Languages
skilled people and focus all of its efforts on the most mission-critical applications
development. Setting technology strategy is one area that companies should not
abdicate to outsourcers. This strategic task is best kept in-house. Ideally, the firm
should have a working relationship of trust with an outsourcing vendor. The vendor
should understand the client’s business and work with client as a partner, adapting
agreements to meet the client’s changing needs.

Firms should clearly understand the advantages provided by the vendor and what
they will have to give up to obtain these advantages. For lower operating costs, can
the client live with a five-second-response time during peak hours or next-day repair
of microcomputers in remote offices? Organizations should not abdicate management
responsibility by outsourcing. They need to manage the outsourcer as they would
manage their own internal information systems department by setting priorities,
ensuring that the right people are brought in, and guaranteeing that information
systems are running smoothly. They should establish criteria for evaluating the
outsourcing vendor that include performance expectations and measurement methods
for response time, transaction volumes, security, disaster recovery, backup in the
event of a catastrophe, processing requirements of new applications and distributed
processing on microcomputers, workstations, and LANs. Firms should design
outsourcing contracts carefully so that the outsourcing services can be adjusted if the
nature of the business changes.

Activity B

Take the case of a petrol pump, a bookstore, a software development company, and
an electronic goods manufacturer. Is outsourcing information systems required for
them? Describe what can be outsourced and the advantages.

..............................................................................................................................

13.7 ENSURING QUALITY WITH INFORMATION

SYSTEM

The emergence of a global economy has stimulated worldwide interest in achieving

quality. Companies can no longer be satisfied with producing goods and services that
compete only with goods produced within their own country – consumers can now
select from a broad range of products and services produced anywhere in the world.
Before examining how information systems can contribute to quality throughout the
organization, we must first define the term quality.

Traditional definitions for quality have focused upon the conformance to

specifications (or the absence of variation from those specifications). With this
definition, a producer can easily measure the quality of its products. Achieving
quality under this definition requires three steps from the manufacturer: First,
establish product specifications. Second, measure products as they are produced to
determine whether or not they achieve the standards established in the specifications.
Third, alter the manufacturing process whenever necessary to bring the products up
to standard. 21
System Analysis and However, achieving quality is not quite that simple and direct. The definition of
Computer Languages quality has been changing and broadening in recent years. Defining quality as
conformances to specifications view it from a producer’s perspective only.
Customers have a different perspective, being more concerned with value for their
Rupees. They normally apply three criteria. First, customers are concerned with the
quality of the physical product. They want to know if the product is durable, how
safe it is, its reliability, its ease of use and installation, its stylishness, and how well the
producer supports the product. Second, customers are concerned with the quality of
service, by which they mean the accuracy and truthfulness of the advertising, the
timeliness and accuracy of the billing process, responsiveness to warranties (implied
as well as specified), and ongoing product support. Finally, customer concepts of
quality include the psychological aspects: how well do the sales and support staff
know their products, the courtesy and sensitivity of the staff, and even their neatness,
the reputation of the product. For companies to compete globally, they need to
include a customer perspective in any definition of quality.

Today more and more businesses are turning to an idea known as total quality
management. Total quality management (TQM) is a concept that makes quality the
responsibility of all people within an organization. TQM holds that the achievement
of quality control is an end in itself. Everyone is expected to contribute to the overall
improvement of quality – the engineer who avoids design errors, the production
worker who spots defects, the sales representative who presents the product properly
to potential customers, and even the secretary who avoids typing mistakes. Total
quality management encompasses all of the functions within an organization. TQM is
based on quality management concepts developed by American quality experts.
Japanese management adopted the goal of zero defects, focusing on improving their
products or services prior to shipment rather than correcting them after they have
been delivered. Japanese companies often give the responsibility for quality
consistency to the workers who actually make the product or service, as opposed to a
quality control department. Studies have repeatedly shown that the earlier in the
business cycle a problem is eliminated, the less it costs for the company to eliminate
it. Thus the Japanese quality approach not only brought a shift in focus to the
workers and an increased respect for product and service quality but also lowered
costs.

How Information Systems Contribute to Total Quality

Management?

Information systems can fill a special role in corporate quality programs for a number
of reasons. First, IS is deeply involved with the daily work of other departments
throughout the organizations. IS analysis usually have taken a leading role in
designing, developing, and supporting such varied departmental systems as corporate
payrolls, patent research systems, chemical process control systems, logistics
systems, and sales support systems. IS professionals also maintain their knowledge
of these departments through their participation in departmental information planning.
In addition, IS personnel are usually key to the sharing of data between departments
because they have unique knowledge of the relationships between various
departments. Often, only IS personnel know where certain data originate, how other
departments use and store them, and which other functions would benefit from
having access to them. With this broad understanding of the functional integration of
the corporation, IS personnel can be valuable members of any quality project team.

The IS staff in effective information systems departments have three skills that are
critical to the success of a quality program. First, they are specialists in analyzing and
redesigning business processes. Second, many IS technicians are experienced in
quantifying and measuring procedures and critical activities in any process. Typically,
IS departments have long been involved with measurements of their own manager
22
training has long been a staple of better IS departments; such training includes the Computer Programming
use of project management, software. These skills can contribute a great deal to any and Languages
serious quality program, which will normally be organized as a project and will usually
be heavily task-oriented.

The information systems staff is the source of ideas on the application of technology
to quality issues; often they are also the people who can make that technology
available to the quality project. For example, with the help of IS departments,
statistical analysis software is becoming more widely used in the drive for quality.

Benchmark: Many companies have been effective in achieving quality by setting

strict standards for products, services and other activities, and then measuring
performance against those standards. Companies may use external industry
standards, standards set by other companies, internally developed high standards, or
some combination of the three.

IS Contributes to these Efforts in Many Ways: IS staff participates in

re-engineering projects and helps to design and build the systems that make the
quality processes possible. Any study of quality programs shows that information is a
top concern to those involved, and IS is often central to the collection of that
information. To improve production or sales, for example, management needs data to
determine both what is being done right and what is being done wrong. IS is usually
the key to making that information available in a timely fashion and in a format useful
to those who need it for quality purposes. For instance, manufacturing data have
traditionally been supplied to management in summary form at the end of the
manufacturing process. In effect it is historical data that at best can be used to
reduce future problems. To provide better information for benchmarking, information
systems specialists can work with business specialists either to design new systems
or to analyze quality-related data found in existing systems.

Use Customer Demands as a Guide to Improving Products and Services:

Improving customer service, making customer service the number one priority, will
improve the quality of the product itself.

Reduce Cycle Time: Experience indicates that the single best way to address
quality problems is to reduce the amount of time from the beginning of a process to
its end (cycle time). Reducing cycle time usually results in fewer steps, an
improvement right there. But reducing cycle time has other advantages. With less
time passing between beginning and end, workers will be better aware of what came
just before, and so are less likely to make mistakes.

Improve the Quality and Precision of the Design: Quality and precision in
design will eliminate many production problems. Computer-aided design (CAD)
software has made dramatic quality improvements possible in a wide range of
businesses from aircraft manufacturing to production of razor blades.

Increase the Precision of Production: For many products, one key way to
achieve quality is to tighten production tolerance. CAD software has also made this
possible. Most CAD software packages include a facility to translate design
specifications into specifications both for production tooling and for the production
process itself. In this way, products with more precise designs can also be produced
more efficiently.

Include Line Workers in any Quality Process: Experience has shown that
involvement of the people who perform the function is critical to achieving quality in
that function. Although the information systems are could potentially make many
more contributions like these, its involvement in corporate quality programs has
provoked a great deal of controversy. IS has been criticized for a reluctance to
23
System Analysis and become involved in organization-wide quality programs. Often IS focuses exclusively
Computer Languages upon technological capabilities while not reaching out to aid the rest of the company
in the ways described above. For example, many IS departments are criticized for
failure to use customer demands as a guide to improving their products and services.
On the other hand, non-IS departments often fail to consider contributions the IS staff
might make to their quality project and so do not reach out to involve them. It is not
uncommon for IS to be viewed only as technical support with little to contribute to the
planning or content of the quality program.

13.8 SUMMARY

In this unit we discuss about computer based information system and their different
types. Information systems have been used by organization as an effective way for
decision-making and in supporting communication. The field of IT moves so rapidly
that terminology often fails to keep pace with innovation. The same problem occurs
with information system classification. People identify a new type of system, such as
DSS or EIS, and describe its characteristics are no longer as important or have
become commonplace. Eventually many information systems contain characteristics
from several system categories. Furthermore a system that fits in a category today
may not fit once new features are added. Information systems that contain
characteristics of several different categories can be called hybrid information
systems.

Organizations in the past few years have shown a tendency to focus on their core
business. Functions that are not considered to be part of the core business are
outsourced to external suppliers. Organizations face an increased need, flexibility as
a consequence of a faster changing competitive environment and rapid developments
in information technology. Management has been questioning the idea that quality
costs more. Today many senior executives have come to the conclusion that the lack
of quality is actually a significant expense. While we all understand that product
returns and repairs result in added costs for repair (labor, parts replacement, and
additional shipping), only recently has management focused on the many previously
hidden costs that arise from producing products that are not high quality.

13.9 UNIT END EXERCISES

1. What types of resources are used in an information system?

2. What are the different types of computer based information system used in
different functional areas business by organizations?

3. Who are the typical users of information system?

4. What is the most common form of IT enabled organizational change?

5. Which form of organizational change requires business processes to be

analyzed simplified and redesign?

6. When outsourcing should be used by the organizations?

7. How Information systems can contribute for total quality management?

24
Computer Programming
13.10 REFERENCES AND SUGGESTED and Languages

FURTHER READINGS
Alter Steven (1999), Information Systems (A Management Perspective),
Pearson Education.
Burch, John (1992), Systems Analysis, Design, and Implementation,
Boston: Boyd & Fraser.
Laudon Kenneth, C., Laudon Jane, P. (1996), Management Information Systems
(Organization and Technology), Prentice Hall of India, New Delhi.
Loff De (1997), Information Systems Outsourcing Decision Making
(A Managerial Approach), IDEA Group.
O’ Brien, James, A (1995), Introduction to Information Systems, Irwin.
Post Gerald, V., and Anderson David, L.(2003), Management Information Systems,
Tata McGraw-Hill, New Delhi.

25
Computer Programming
UNIT 14 SYSTEM ANALYSIS AND DESIGN
and Languages

Structure
14.1 Introduction
14.2 Objectives
14.3 Traditional Systems Life Cycles
14.3.1 Initiation
14.3.2 Development
14.3.3 Implementation
14.3.4 Operations and Maintenance
14.4 Systems Life Cycle
14.4.1 Stages of the Systems Life Cycle
14.5 Systems Analysis
14.6 Systems Design
14.6.1 Logical and Physical Design
14.7 Implementation and Maintenance
14.7.1 Programming
14.7.2 Testing
14.7.3 Conversion
14.7.4 Production and Maintenance
14.8 Summary
14.9 Unit End Exercises
14.10 References and Suggested Further Readings

14.1 INTRODUCTION

From the inception of an idea for a software system, until it is implemented and
delivered to a customer, and even after that, the system undergoes gradual
development and evolution. The software is said to have a life cycle composed of
several phases. Each of these phases results in the development of either a part of
the system or something associated with the system, such as a test plan or a user
manual. In the traditional life cycle model, each phase has well-defined starting and
ending points, with clearly identifiable deliverables to the next phase.

14.2 OBJECTIVES

After reading this unit, you should be able to:

• Describe traditional systems life cycles;
• Identify different phases of system life cycle;
• Explain the process of system analysis;
• Describe the conceptual basis of system design; and
• Know about Implementation and maintenance of software.

1
System Analysis and
14.3 TRADITIONAL
Computer Languages SYSTEM LIFE CYCLE

The goal of the traditional system life cycle is to keep the project under control and
assure that the information system produced, satisfies the requirements. The
traditional system life cycle divides the project into a series of steps, each of which
has distinct deliverables, such as documents or computer programs. This is known as
the systems development life cycle (SDLC). The deliverables are related because
each subsequent step builds on the conclusions of previous steps. This has been
shown in Figure 14.1. Some deliverables are oriented toward the technical staff,
whereas others are directed toward or produced by users and mangers. The latter
ensure that users and their management are included in the system development
process.

Fig. 14.1: Phases of SDLC

Source: Alter Steven, (1999) Information Systems (A management perspective), Pearson

2 Education
Although there is general agreement about what needs to be done Computer Programming
in the traditional
and Languages
system life cycle, different authors name individual steps and deliverables differently.
Many versions of the traditional system life cycle emphasize the building or software
and de-emphasize what happens in the organization before and after software
development. Because this unit is directed at business professionals, its version of the
traditional system life cycle emphasizes implementation and operation in the
organization in addition to software development.

14.3.1 Initiation
The initiation phase may begin in many different ways. A user may work with the IS
staff to produce a written request to study a particular business problem. The IS staff
may discover an opportunity to use information systems beneficially and then try to
interest users. A top manager may notice a business problem and ask the head of IS
to look into it. A computer crash or other operational problem may reveal a major
problem that can be patched temporarily but requires a larger project to fix it
completely. Regardless of how this phase begins, its goal is to analyze the scope and
feasibility of a proposed system and to develop a project plan. This involves two
steps, the feasibility study and project planning, which produce the functional
specification and a project plan.

The feasibility study is a user-oriented overview of the proposed information system’s

purpose and feasibility. A system’s feasibility is typically considered from economic,
technical, and organizational viewpoints.

• Economic feasibility involves question such as whether the firm can afford to
build the information system, whether its benefits should substantially exceed
its costs, and whether the project has higher priority than other projects that
might use the same resources.

• Technical feasibility involves question such as whether the technology needed

for the information system exists and whether the firm has enough experience
using that technology.

• Organizational feasibility involves questions such as whether the information

system has enough support to be implemented successfully, whether it brings
as excessive amount of change, and whether the organization is changing too
rapidly to absorb it.

If the information system appears to be feasible, the initiation phase produces a

functional specification and a project plan. The functional specification explains the
important of the business problem; summarizes changes in business processes; and
estimates the project’s benefits, costs, and risks. The project plan breaks the project
into sub-projects with start and completion times. It also identifies staffing, resource
requirements, and dependencies between project steps.

The functional specification is approved by both user and IS personnel. It clarifies

the purpose and scope of the proposed project by describing the business
processes that will be affected and how they will be performed using the system.
Functional specifications once consisted primarily of prose. With the advent of
diagramming tools such as data flow have become much easier to read and
understand. These visual representations help parts of the system will play.
Functional specifications typically do not explain exactly what data, reports, or data
entry screens will be included. This more detailed description is produced in the
development phase.

3
System Analysis and
Computer Languages

Fig. 14.2: Steps in Development Phase of System Life Cycle

Source: Alter Steven, (1999) Information Systems (A management perspective), Pearson

4
Education
14.3.2 Development Computer Programming
and Languages

The development phase creates computer programs (with accompanying user and
programmer documentation) plus installed hardware that accomplishes the data
processing described in the functional specification. This is done through a process of
successive refinement in which the functional requirements are translated into
computer programs and hardware requirements. The purpose of the various steps
and deliverables in the development phase is to ensure that the system accomplishes
the goals explained in the functional specification. These steps are summarized in
Figure 14.2.

The first step in the development phase is the detailed requirements analysis, which
produces a user-oriented description of exactly what the information system will do.
This step is usually performed by a team including user representative and the IS
department.

It produces a document called the external specification. Building on the functional

specification, the external specification shows the data input screens and major
reports and explains the calculations that will be automated. It shows what
information system users will see, rather than explaining exactly how the computer
will perform the required processing. Users reviewing this document focus on
whether they understand the data input screens, reports, and calculations, and
whether these will support the desired business process. By approving the external
specification, the users and IS staff signify their belief that the information system will
accomplish what they want.

The next step is internal system design, in which the technical staff decides how the
data processing will be configured on the computer. This step produces the internal
specification, a technical blueprint for the information system. It documents the
computer environment the system will operate in, the detailed structure and content
of the database, and the inputs and outputs of all programs and subsystems. Users do
not sign off on the internal specification because it addresses technical system design
issues. Instead, the IS staff signs off that the internal specification accomplishes the
functions called for in the external specification the users have approved.

Thus far the discussion has focused on software. Because the software will work
only if there is hardware for it to run on, and essential step in the development phase
is hardware acquisition and installation. For some information systems, this is not an
issue because it is a foregone conclusion that existing hardware will be used. Other
systems require a careful analysis to decide which hardware to acquire, how to
acquire it most economically, where to put it, and how to install it by the time it is
indeed. Factors considered in hardware acquisition decisions include compatibility
with existing hardware and software, price, customer service, and compatibility with
long-term company plans. Computer hardware can be purchased or rented through a
variety of financing arrangements, each with its own tax consequences. A firm’s
finance department usually makes the financing arrangements for significant
hardware purchases. Especially if new computer hardware requires a new computer
room, lead times for building the room, installing the electricity and air conditioning,
and installing the computer may be important factors in the project plan.

In firms with large IS staffs; users rarely get involved with the acquisition, installation,
and operation of computer hardware. Much as with telephone systems, users expect
the hardware to be available when needed and complain furiously whenever it goes
down. This is one reason computer hardware managers sometimes consider their
jobs thankless.
5
System Analysisisand
Programming the creation of the computer code that performs the calculations,
Computer Languages
collects the data, and generates the reports. It can usually proceed while the
hardware is being acquired and installed. Programming includes the coding, testing,
and documentation of each program identified in the internal specification. Coding is
what most people think of as programming. The testing done during the programming
step is often called unit testing, because it treats the programs in isolation.
The documentation of each program starts with the explanation from the internal
specification and includes comments about technical assumptions made in writing the
program, plus any subtle, non-obvious processing done by the program.

A number of improvements in programming methods have made programming faster

and more reliable. Structured programming is often used to make the programs more
consistent, easier to understand and less error prone. Fourth generation languages
(4GLs) also expedite programming for some systems. However, as should be clear
from all of the steps leading up to coding and following coding, coding often accounts
for less than 20% of the work in developing a system. This is one of the reasons
4GLs and other improved programming tools do not drastically shrink the system life
cycle for large systems, even when they slash programming time.

Documentation is another activity that can proceed in parallel with programming and
hardware acquisition. Both user and technical documentation is completed from the
material that already exists. The functional specification and external specification
are the basis for the user documentation, and the internal specification and program
documentation are the basis for the programmer documentation. With the adoption of
Computer Aided Software Engineering (CASE) tools, more of the documentation is
basically a compilation of data and diagrams already stored on a computer. Additional
user documentation is usually required, however, because different users need to
know different things depending on their roles. People who perform data entry tasks
need to understand the data entry procedures and what the data mean; people who
use data from the system need to understand what the data mean and how to retrieve
and analyze data, but do not need to know much about data entry details.

After the individual programs have been tested, the entire information system must be
tested to ensure that the programs operate together to accomplish the desired
functions. This is called the system testing, or integration testing. System tests
frequently uncover inconsistencies among programs as well as inconsistencies in the
original internal specification. These must be reconciled and the programs changed
and retested. One of the reasons for Microsoft’s “synch and stabilize” method is to
eliminate the surprises and extensive network that might occur if system testing
showed that programs were incompatible. Although system testing may seem an
obvious requirement, inadequate system testing has led to serious problems.
For example, a new trust accounting system put into operation prematurely by Bank
of America on March 1, 1987, lost data and fell months behind in generating
statements for customers. By January 1988, 100 institutional customers with $ 4
billion in assets moved to other banks, several top executives resigned, and 2.5 million
lines of code were scrapped.

An important part of testing is the creations of a testing plan, a precise statement of

exactly how the information system will be tested. This plan includes the data that
will be used for testing. Creating a testing plan serves many purposes. It encourages
careful thought about how the system will be tested. In addition, a thorough plan
increases the likelihood that all foreseeable contingences will be considered and that
the testing will catch more of the bugs in the system.

6
Computer
It should be clear that the development phase for a large information Programming
system is a
and
complex undertaking, quite different from sitting down at a personal computer andLanguages
developing a small spreadsheet model. Explicitly separating out all the steps in the
development phase helps to ensure that the information system accomplishes the
desired functions and is debugged. Such an elaborate approach is needed because the
system is a tool of an organization rather than an individual. An individual producing a
spreadsheet is often typing to solve a current problem with no intention to use the
spreadsheet next month, much less that someone else will need to decipher and
modify it next year. In contrast, the traditional system life cycle assumes that the
information system may survive for years, may be used by people who were not
involved in its development, and may be changed repeatedly during that time by
people other than the original developers. The steps in the traditional life cycle try to
make the long-term existence of the information system as efficient error-free as possible.

14.3.3 Implementation
Implementation is the process of putting a system into operation in an organization.
Figure 14.3 shows that it starts with the end product of the development phase,
namely, a set of computer programs that run correctly on the computer, plus
accompanying documentation. This phase begins with implementation planning, the
process of creating plans for training, conversion, and acceptance testing.

Fig. 14.3: Steps in the Implementation of System Life Cycle

Source: Alter Steven, (1999) Information Systems (A management perspective), Pearson

Education
7
System
The Analysis
training planand
explains how and when the user will be trained. The conversion
Computer Languages
plan explains how and when the organization will convert to new business processes.
The acceptance-testing plan describes the process and criteria for verifying that the
information system works properly in supporting the improved work system.

Training is the process of ensuring that system participants know what they need to
know about both the work system and the information system. The training format
depends on user backgrounds and the purpose and features of both the work system
and the information system. Users with no computer experience may require special
training. Training for frequently used transaction processing systems differs from
training for data analysis systems that are used occasionally. Information systems
performing diverse functions require more extensive training than systems used
repetitively for new functions. Training manuals and presentations help in the
implementation system. After the previous methods have receded into history, other
types of training material are more appropriate.

Following the training comes the carefully planned process of conversion from the old
business processes to new ones using the new information system. Conversion is
often called cutover or changeover. It can be accomplished in several ways,
depending on the nature of the work and the characteristics of the old and new
systems. One possibility is to simply choose a date, shut off the old information
system, and turn on the new one while hoping that the work system will operate as
intended. This is risky, though, because it does not verify that the information system
will operate properly and that the users understand how to use it.

Consider the following example: The State of California installed an optical disk
system to streamline the process of doing title searches (establishing ownership and
identifying indebtedness on a property) for borrowers who wished to purchase
property. Previously, there was a 2 to 3 week delay between the borrower’s loan
request and the bank’s receipt of a confirmation that the title was clear. The new
system was to reduce this delay to 2 days. Both the vendor and several state officials
recommended that the existing manual system remain in full operation during the
conversion in case of problems. However, the Secretary of Finance rejected the
request for an additional $2.4 million, and the manual system was simply shut down
when the optical disk system came up. Unfortunately, software bugs plagued the new
system, and the resulting logjam of 50,000 loan requests delayed title searches for up
to 10 weeks. The new system was shut down for repair, and the old manual system
reinstated. The Assistant Secretary of State said that some banks almost went out of
business because of the slow turnaround.

To minimize risk and wasted effort, most conversions occur in stages, which can be
done in several ways. A phased approach uses the new information system and work
system for a limited subset of the processing while continuing to use old methods for
the rest of the processing. If something goes wrong, the part of the business using the
new system can switch back to the old system. The simultaneous use of the old
system and the new system is called running in parallel. Although this involves double
record keeping for a while, it verifies that the new information system operates
properly and helps the users understand how to use it effectively within the new work
system.

Conversions from one computerized system to another are often far more difficult
than users anticipate. Part of the problem is that computerized data in the old system
must be converted into the formats used by the new system. In consistencies
between the two systems frequently lead to confusion about whether the data in
8
Computer
either system are correct. Furthermore, programs that convert the Programming
data from one
and
system to another may have their own bugs, thereby adding to confusion and Languages
delays.

Conversion requires careful planning because people who don’t want the new system
and use the problems as an opportunity to complain can blow even minor problems
out of proportion. For these reasons, it is often wise to do a pilot implementation with
a small group of users who are enthusiastic about the system improvements. Ideally,
their enthusiasm will motivate them to make the effort to learn about the changes and
to forgive minor problems. After a pilot implementation demonstrates that the new
information system works, it is usually much easier to motivate everyone else
(including the skeptics) to start using it.

Acceptance testing is testing of the information system by the users as it goes into
operation. Acceptance testing is important because the information system may not
fit, regardless of what was approved and signed off in the external specification. The
business situation may have changed; the external specification may reflect
misunderstandings; the development process may have introduced errors; or the
implementation may have revealed unforeseen problems. For all these reasons, it
makes sense to include an explicit step of deciding whether the information system is
accepted for ongoing use. If it doesn’t fit user needs, for whatever reason, installing it
without changes may lead to major problems and may harm the organization instead
of helping. Acceptance testing also solidifies user commitment because it gets people
in the user organization to state publicly that the system works.

The post-implementation audit is the last step in the implementation phase, even
though it occurs after the new system has been in operation for a number of months.
Its purpose is to determine whether the project has met its objectives for costs and
benefits and to make recommendations for the future. This is also an opportunity to
identify what the organization can learn from the way the project was carried out.

14.3.4 Operations and Maintenance

The operation and maintenance phase starts after the users have accepted the new
system. This phase can be divided into two activities: (1) ongoing operation and
support, and (2) maintenance. Unlike the other steps in the life cycle, these steps
continue throughout the system’s useful life. The end of a system’s life cycle is its
absorption into another system or its termination.

Ongoing operation and support is the process of ensuring that the technical system
components continue to operate correctly and that the users use it effectively. This
process is similar to the process of making sure a car or building operates well. It
works best when a person or group has direct responsibility for keeping the
information system operating. This responsibility is often split, with the technical staff
taking care of computer operations and a member of the user organization ensuring
that users understand the system and use it effectively.

Day-to-day computer operations typically include scheduled events such as

generating summary reports from management and backups of the database.
The operations manual specifies when these jobs should be done. For transaction
processing systems essential to the operation of the business, a member of the
technical staff also monitors computer-generated statistics related to response times,
program run times, disk space utilization, and similar factors to ensure the programs
are running efficiently.
9
Systemthe
When Analysis and becomes too full, or when response times start to increase, the
database
Computer Languages
technical configuration of the information system must be changed. This is done by
allocating more disk space, unloading (backing up onto tape or discarding) data that
are not current, or changing job schedules.

Maintenance is the process of modifying the information system over time. As users
gain experience with a system, they discover its shortcomings and usually suggest
improvements. The shortcomings may involve problems unrelated to the information
system or may involve ways that the information system might do more to support the
work system, regardless of the original intentions. Some shortcomings are bugs.
Important shortcomings must be corrected if users are to continue using an
information system enthusiastically.

Handling enhancement requests and bug fix requests is both a technical challenge
and a delicate political issue for IS departments. The technical challenge is ensuring
that changes don’t affect other parts of the system in unanticipated ways. The
traditional life cycle helps here because documentation and internal design methods
enforce modularization and make it easier to understand the scope and impact of
changes.

The political issue for most IS departments are their inability to support even half of
the enhancement requests they receive. For new or inadequately planned information
systems, some departments have more enhancement requests than they can even
analyze. In this environment, it requires both technical and political skill to keep users
satisfied. Users are often frustrated by how long it takes to make changes.

What might seem to be a simple change to a person who “programs” spreadsheet is

often vastly more complex in a large information spawn changes in several levels of
documentation.

The steps in each of the four phases of the traditional system life cycle have now
been introduced. Table 14.1 outlines the steps in each phase and makes two major
points in addition to the details it presents. First it shows that users are highly
involved in three of the four phases. In other words, building information systems is
not just technical work done by the technical staff. It also shows that each step has
specific deliverables that document progress to date and help keep the project under
control.

The traditional system life cycle is a tightly controlled approach designed to reduce
the likelihood of mistakes or omissions? Despite its compelling logic, it has both
advantages and disadvantages. Adherence to fixed deliverables and signoffs
improves control but guarantees a lengthy process. Having specific deliverables due
at specific times makes it schedule of deliverables sometimes takes on a life of its
own and seems as important as the real project goals.

When merely going through the motions of producing deliverables on schedule,

participants may be tempted to turn in work that is incomplete and to approve
documents they do not truly understand.

The traditional system life cycle is the standard against which other approaches are
compared. Project managers who want to bypass some of its steps still need a way
to deal with the issues they raise.

10
Computer
Table 14.1: Step and Deliverables in the Traditional System Programming
Life Cycle
and Languages

Phase/Step Degree of user Key deliverable, plan Key participants

participation or document

Initiation

* Feasibility study High Functional specification User representa

tives, management,
and technical staff

* Project planning Medium Project plan User representatives,

management, and
technical staff

Development

*Detailed requirements High External specification User representatives,

analysis management, and
technical staff

* Internal system None Internal specification Programmers and

design technical staff

* Hardware acquisition None Hardware plan Technical staff

and installation Hardware operational

* Programming None Individual programs Programmers

debugged

* Documentation Medium User and programmer Technical staff and

documentation users

* System testing Medium Test plan Programmers and

Completed system test users

Implementation

* Implementation High Implementation plan Training, users, and

planning management

* Training High Training materials Trainers and users

* Conversion High System in use Users and project team

* Accepting testing High System accepted Users and project team

* Post implementation High Audit report Users and

audit management
Operation and Maintenance

* Ongoing operation Low Operations manual Technical staff

and support

Low Usage statistics Technical staff & user

High Enhancement requests Technical staff and

and bug fix requests users

* Maintenance Medium Maintenance plan Technical staff and

users
* Absorption or - - -
termination
11
System Analysis
Activity A and
Computer Languages
Take a business problem concerning your top manager and the IS department.
Propose a system, which can be put on in such cases. Analyze the scope and
feasibility of the proposed system and develop a project plan.

.............................................................................................................................

14.4 SYSTEMS LIFE CYCLE

The systems life cycle is the oldest method for building information systems and is
still used today for complex medium or large systems projects. This methodology
assumes that an information system has a life cycle similar to that of any living
organism, with a beginning, middle, and an end. The life cycle for information system
has six stages: project definition, systems study, design, programming, installation, and
post-implementation. Each stage consists of basic activities that must be performed
before the next stage can begin.

The life cycle methodology is a very formal approach to building systems. It partitions
the systems development process into distinct stages and develops an information
system sequentially, stage by stage. The life cycle methodology also has a very
formal division of labor between end users and information systems specialists.
Technical specialists such as systems analysts and programmers are responsible for
much of the systems analysis, design, and implementation work; end users are limited
to providing information requirements and reviewing the work of the technical staff.
Formal sign-offs or agreements between and users and technical specialists are
required as each stage is completed.

Product or output of each stage of the life cycle that is the basis for such sign-offs.
The project definition stage results in a proposal for the development of a new
system. The systems study stage provides a detailed systems proposal report outlining
alternative solutions and establishing the feasibility of proposed solutions. The design
stage results in a report on the design specifications for the system solution that is
selected. The programming stage results in actual software code for the system. The
installation stage outputs the results of tests to assess the performance of the system.
The post-implementation stage concludes with a post-implementation audit to
measure the extent to which the new system has met its original objectives. We now
describe the stages of the life cycle in detail.

14.4.1 Stages of the Systems Life Cycle

The project definition stage tries to answer the questions, “Why do we need a new
system project?” and “What do we want to accomplish?” This stage determines
whether the organization has a problem and whether that problem can be solved by
building a new information system or by modifying an existing one. If a system
project is called for, this stage identifies its general objectives, specifies the scope of
the project, and develops a project plan that can be shown to management.

12
The systems study stage analyzes the problems of existing systems Computer
(manualProgramming
or
and Languages
automated) in detail, identifies objectives to be attained by a salutation to these
problems, and describes alternative solutions. The systems study stage examines the
feasibility of each solution alternative for review by management. This stage tries to
answer the questions, “What doe the existing systems do?” “What are their strengths,
weakness, trouble spots, and problems?” “What user information requirements must
be met by the solution?” “What alternative solution options are feasible?” “What are
their costs and benefits?”

Answering these questions requires extensive information gathering and research;

sifting through documents, reports, and work papers produced by existing systems;
observing how these systems work; polling users with questionnaires; and conducting
interviews. All of the information gathered during the systems study phase will be
used to determine information system requirements. Finally, the systems study stage
describes in detail the remaining life cycle activities and the tasks for each phase.

The design stage produces the logical and physical design specification for the
solution. Because the life cycle emphasizes formal specifications and paperwork,
many of the design and documentation tools, such as data flow diagrams, structure
charts, or system flowcharts are likely to be utilized.

The programming stage translates the design specifications produced during the
design stage into software program code. Systems analysts work with programmers
to prepare specifications for each program in the system. These program
specifications describe what each program will do, the type of programming language
to be used, inputs and outputs, processing logic, processing schedules, and control
statements such as those for sequencing input data. Programmers write customized
program code typically using a conventional third-generation programming language
such as COBOL or FORTRAN or a high-productivity fourth-generation language.
Since large systems have many programs with hundreds of thousands of lines of
program code, entire teams of programmers may be required.

The installation stage consists of the final steps to put the new or modified system
into operation: testing, training, and conversion. The software is tested to make sure it
performs properly from both a technical and a functional business standpoint.
Business and technical specialists are trained to use the new system. A formal
conversion plan provides a detailed schedule of all of the activities required to install
the new system, and the old system is converted to the new one.

The post-implementation stage consists of using and evaluating the system after it is
installed and is in production. It also includes updating the system to make
improvements. Users and technical specialists will go through a formal post-
implementation audit that determines how well the new system has met its original
objectives and whether any revisions or modifications are required. After the system
has been fine-tuned it will need to be maintained while it is in production to correct
errors, meet requirements, or improve processing efficiency. Over time, the system
may require so much maintenance to remain efficient and meet user objectives that it
will come to the end of its useful life span. Once the system’s life cycle comes to an
end, a completely new system is called for and the cycle may begin again.

14.5 SYSTEMS ANALYSIS

Systems analysis is the analysis of the problem that the organization will try to solve
with an information system. It consists of defining the problem, identifying its causes,
specifying the solution, and identifying the information requirements that must be met
by a system solution.
13
System
The keyAnalysis and any large information system is a thorough understanding of the
to building
Computer Languages
existing organization and system. Thus, the systems analyst creates a road map of the
existing organization and systems, identifying the primary owners and users of data in
the organization. These stakeholders have a direct interest in the information affected
by the new system. In addition to these organizational aspects, the analyst also briefly
describes the existing hardware and software that serve the organization.

From this organizational analysis, the systems analyst details the problems of existing
systems. By examining documents, work papers, and procedures; observing system
operations; and interviewing key users of the systems, the analyst can identify the
problem are and objectives to be achieved by a solution. Often the solution requires
buildings a new information system or improving an existing one.

Feasibility

In addition to suggesting a solution, systems analysis involves a feasibility study to

determine whether that solution is feasible, or achievable, given the organization’s
resources and constraints. Three major areas of feasibility must be addressed:

Technical Feasibility: Whether the proposed solution can be implemented with the
available hardware, software, and technical resources.

Economic Feasibility: Whether the benefits of the proposed solution outweigh the
costs. We explore this topic in greater detail in Section 11.4, Understanding the
Business Value of Information Systems.

Organizational Feasibility: Whether the proposed solution is desirable within the

existing managerial and organizational framework.

Normally the systems analysis process will identify several alternative solutions that
can be pursued by the organization. The process will then assess the feasibility of
each. Three basic solution alternatives exist for every systems problem:
1. To do nothing, leaving the existing situation unchanged
2. To do modify or enhance existing systems
3. To develop a new system
There may be several solution design options within the second and third solution
alternatives. A written systems proposal report will describe the costs and benefits,
advantages and disadvantages of each alternative. It is then up to management to
determine which mix of costs, benefits, technical features, and organization impacts
represents the most desirable alternative.

Establishing Information Requirements

Perhaps the most difficult task of the systems analyst is to define the specific
information requirements that must be met by the system solution selected. This is the
area where many large system efforts go wrong and the one that poses the greater
difficulty for the analyst. At the most basic level, the information requirements of a
new system involve identifying who needs what information, where, when, and how.
Requirements analysis carefully defines the objectives of the new or modified system
and develops a detailed description of the functions that the new system must
perform. Requirements must consider economic, technical, and time constraints, as
well as the goals, procedures, and decision processes of the organization. Faulty
requirements analysis is a leading cause of systems failure and high systems
development costs. A system designed around the wrong set of requirements either
will have to be discarded because of poor performance or will need to be heavily
revised. Therefore, the importance of requirements analysis must not be
14
underestimated.
Developing requirements specifications may involve considerable Computer
researchProgramming
and
revision. A business function may be very complex or poorly defined. A manual and Languages
system or routine set of inputs and outputs may not exist. Procedures may vary from
individual to individual. Such situations will be more difficult to analyze, especially if
the users are unsure of what they want or need (this problem is extremely common).
To derive information systems requirements, analysts may be forced to work and
re-work requirements statements in cooperation with users. Although this process is
laborious, it is far superior to and less costly than redoing and undoing an entire
system. There are also alternative approaches to eliciting requirements that help
minimize these problems.

In many instances, business procedures are unclear or users disagree about how
things are done and should be done. Systems analysis often makes an unintended
contribution to the organization by clarifying procedures and building organizational
consensus about how things should be done. In many instances, building a new
system creates an opportunity to redefine how the organization conducts its daily
business.

Some problems do not require an information system solution, but instead need an
adjustment in management, additional training, or refinement of existing organizational
procedures. If the problem is information-related, systems analysis may still be
required to diagnose the problem and arrive at the proper solution.

14.6 SYSTEMS DESIGN

While systems analysis describes what a system should do to meet information

requirements, systems design shows how the system will fulfill this objective. The
design of an information system is the overall plan or model for that system. Like the
blueprint of a building or house, it consists of all the specifications that give the
system its form and structure. Information systems design is an exacting and creative
task demanding imagination, sensitivity to detail, and expert skills.

Systems design has three objectives. First, the systems designer is responsible for
considering alternative technology configurations for carrying out and developing the
system as described by the analyst. This may involve analyses of the performance of
different pieces of hardware and software, security capabilities of systems, network
alternatives, and the portability or changeability of systems hardware.

Second, designers are responsible for the management and control of the technical
realization of systems. Detailed programming specifications, coding of data,
documentation, designers are responsible for the actual procurement of the hardware,
consultants, and software needed by the system.

Third, the systems designer details the system specifications that will deliver the
functions identified during systems analysis. These specifications should address all of
the managerial, organizational, and technological components of the system solution.

14.6.1 Logical and Physical Design

The design for an information system can be broken down into logical and physical
design specifications. Logical design lays out the components of the system and their
relationship to each other, as they would appear to users. It showed what the system
solution would do as opposed to how it is actually implemented physically. It describes
inputs and outputs, processing functions to be performed, business procedures, data
models, and controls. (Controls specify standards for acceptable performance and
methods for measuring actual performance in relation to these standards. They are
described in detail). 15
System Analysis
Physical design and
is the process of translating the abstract logical model into the
Computer Languages
specific technical design for the new system. It produces the actual specifications for
hardware, software, physical databases, input/output media, manual procedures, and
specific controls. Physical design provides the remaining specifications that transform
the abstract logical design plan into a functions system of people and machines.

Design Alternative

Like houses or buildings, information systems may have many possible designs.
They may be centralized or distributed, on-line or batch, partially manual, or heavily
automated. Each design represents a unique blend of all of the technical and
organizational factors that shape an information system. What makes one design
superior to others is the ease and efficiency with which it fulfills user requirements
within a specific set of technical, organizational, financial, and time constraints.

Before the design of an information system is finalized, analysts will evaluate various
design alternatives. Based on the requirements definition and systems analysis,
analysts construct high-level logical design models. They then examine the costs,
benefits, strengths, and weaknesses of each alternative.

Illustrate design alternatives for a corporate cost system, which maintains data on the
costs of various products produced by the corporation’s operating units in various
locations. The first alternative is a batch system that maximizes the efficiency and
economy of computer processing but requires extensive manual preparation of data.
The batch system requires the following steps:
1. Operating units prepare cost sheets with product cost data by plant. Sheets are
mailed to corporate cost accounting at corporate headquarters.
2. Corporate cost accounting reviews cost sheets and prepares transactions forms,
which are entered into the system.
3. The corporate product database is updated twice weekly via batch processing.
The database maintains standard product cost data by plant and links local product
numbers to corporate product numbers. The update also produces standard cost
sheets.
4. Copies the standard cost sheets are mailed back to the operating units.
There is also a time lag between the preparation of operating unit cost sheets and the
point when this information is reflected on the product database.

The second design alternative is an on-line system featuring more timely information
and reduced manual effort, but at greater cost for computer processing, software,
and security and recovery procedures required to maintain the integrity of the product
database. The steps for the on-line system are as follows:

1. Operating units enter their own product cost data on-line via local CRT terminals
with telecommunications links to the central corporate mainframe.

2. Through extensive on-line editing, the operating unit product data are edited.
Errors are corrected and the data immediately update the corporate product
database.

3. Up-to-date product cost information is available immediately after update.

The system produces hard copy standard cost sheets or allows the operating units
to perform on-line inquires about product cost information.

This alternative reduces manual activities and provides up-to-date-minute information

both to corporate cost accounting and to the operating units.
16
The Role of End Users Computer Programming
and Languages
Technical specialists cannot direct information systems design alone. It demands a
very high level of participation and control by end users. User information
requirements drive the entire systems-building effort. Users must have sufficient
control over the design process to ensure that the system reflects their business
priorities and information needs, not the biases of the technical staff.

Working on design increases users’ understanding and acceptance of the systems,

reducing problems caused by power transfers, inter-group conflict, and unfamiliarity
with new system functions and procedures. Insufficient user involvement in the
design effort is a major cause of system failure.

Some MIS researchers have suggested that design should be “user led.” However,
other researchers point out that systems development is not an entirely rational
process. Users leading design activities have used their position to further private
interests and gain power rather than to enhance organizational objectives. Users
controlling design can sabotage or seriously impede the systems-building effort.

The nature and level of user participation in design vary from system to system.
There is less need for user involvement in systems with simple or straightforward
requirements than in those with requirements that are elaborate, complex, or vaguely
defined. Transaction processing or operational control systems have traditionally
required less user involvement than strategic planning, information reporting, and
decision-support systems. Less structured systems need more user participation to
define requirements and may necessitate many versions of design before
specification can be finalized.

Different levels of user involvement in design are reflected in different systems

development methods. How user involvement varies with each development
approach.

14.7 IMPLEMENTATION AND MAINTENANCE

The remaining steps in the systems development process translate the solution
specifications established during systems analysis and design into a fully operational
information system. These concluding steps consist of programming, testing,
conversion, and production and maintenance.

14.7.1 Programming
The process of translating design specifications into software for the computer
constitutes a smaller portion of the systems development cycle than design and
perhaps the testing activities. But it here, in providing the actual instructions for the
machine, that the heart of the system takes shape. During the programming stage,
system specifications that were prepared during the design stage are translated into
program code. On the basis of detailed design documents for files, transaction and
report layouts, and other design details, specifications for each program in the system
are prepared.

Some systems development projects assign programming tasks to specialists whose

work consists exclusively of coding programs. Other projects prefer programmer/
analysts who both design and program functions. Since large systems entail many
programs with thousands – even hundreds of thousands – of lines of code,
programming teams are frequently used. Moreover, even if an entire system can be
programmed by a single individual, the quality of the software will be higher if it is
17
subject to group review.
System Analysis
14.7.2 Testingand
Computer Languages
Exhaustive and thorough testing must be conducted to ascertain whether the system
produces the right results. Testing answers the question, “Will the system produce the
desired results under known conditions?”

The amount of time needed to answer this question has been traditionally underrated
in systems project planning. As much as 50 per cent of the entire software
development budget can be extended in testing. Testing is also time-consuming: Test
data must be carefully prepared, results reviewed, and corrections made in the
system. In some instances, parts of the system may have to be redesigned. Yet the
risks of glossing over this step are enormous.

Testing information system can be broken down into three types of activities: Unit
testing, or program testing, consists of testing each program separately in the system.
While it is widely believed that the purpose of such testing each program separately
in antee that programs is error free, this goal is realistically impossible. Testing should
be viewed instead as a means of locating errors in programs, focusing on finding all
the ways to make a program fail. Once pinpointed, problems can be corrected.

System testing the functioning of the information system as a whole. It tries to

determine if discrete modules will function together as planned and whether
discrepancies exist between the ways the system actually works and the way it was
conceived. Among the areas examined are performance times, capacity for the
storage and handling peak loads, recovery and restart capabilities, and manual
procedures.

Acceptance testing provides the final certification that the system is ready to be used
in a production setting. Systems tests are evaluated by users and reviewed by
management. When all parties are satisfied that the new system meets their
standards, the system is formally accepted for installation.

It is essential that all aspects of testing be carefully thought out and that they be as
comprehensive as possible. To ensure this, the development team works with users to
devise a systematic test plan. The test plan includes all of the preparations for the
series of tests previously described.

The general condition being tested here is a record change. The documentation
consists of a series of test-plan screens maintained on a database (perhaps a
microcomputer database) that is ideally suited to this kind of application.

Users play a critical role in the testing process. They understand the full range of
data and processing conditions that might occur within their system. Moreover,
programmers tend to be aware only of the conditions treated in their programs; the
test data they devise are usually too limited. Therefore, input from other team
members and users will help ensure that the range of conditions included in the test
data is complete. Users can identify frequent and less common transactions, unusual
conditions to anticipate, and most of the common types of errors that might occur
when the system is in use. User input is also decisive in verifying the manual
procedures for the system.

14.7.3 Conversion
Conversion is the process of changing from the old system to the new system.
It answers the question, “Will the new system work under real conditions?” Four
main conversion strategies can be employed: the parallel strategy, the direct cutover
strategy, the pilot study strategy, and the phased approach strategy.
18
Computer
In a parallel strategy, both the old system and its potential replacement areProgramming
run
and Languages
together for a time until everyone is assured that the new one functions correctly.
This is the safest conversion approach because, in the even to errors or processing
disruptions, the old system can still be used as a backup. However, this approach is
very expensive, and additional staff or resources may be required to run the extra
system.

The direct cutover strategy replaced the old system entirely with the new system on
an appointed day. At first glance, this strategy seems less costly than parallel
conversion strategy. However, it is a very risky approach that can potentially be more
costly than parallel activities if serious problems with the new system are found.
There is no other system to fall back on. Dislocations, disruptions, and the cost of
corrections may be enormous.

The pilot study strategy introduces the new system only to a limited area of the
organization, such as a single department or operating unit. When this pilot version is
complete and working smoothly, it is installed throughout the rest of the organization,
either simultaneously or in stages.

The phased approach strategy introduces the new system in stages, either by
functions or by organizational units. If, for example, the system is introduced by
functions, a new payroll system might begin with hourly workers who are paid
weekly, followed six months later by adding salaried employees who are paid monthly
to the system. If the system is introduced by organizational units, corporate
headquarters might be converted first, followed by outlaying operating units four
months later.

A formal conversion plan provides a schedule of all the activities required to install
the new system. The most time-consuming activity is usually the conversion of data.
Data from the old system must be transferred to the new system, either manually or
through special conversion software programs. The converted data then must be
carefully verified for accuracy and completeness.

Moving from an old system to a new one requires that end users be trained to use the
new system. Detailed documentation showing how the system works from both a
technical and end-user standpoint is finalized during conversion time for use in
training and everyday operations. Lack of proper training and documentation
contributes to system failure, so this portion of the systems development process is
very important.

14.7.4 Production and Maintenance

After the new system is installed and conversion is complete, the system is said to be
in production. During this stage, both users and technical specialists to determine how
well it has met its original objectives and to decide whether any revisions or
modifications are in order will review the system. Changes in hardware, software,
documentation, or improve processing efficiency are termed maintenance.

Studies of maintenance have examined the amount of time required for various
maintenance tasks. Approximately 20 per cent of the 20 per cent is concerned with
changes in data, files, reports, hardware, or system software. But 60 percent of all
maintenance work consists of making user enhancements, improving documentation,
and recording system components for greater processing efficiency. The amount of
work in the third category of maintenance problems could be reduced significantly
through better system analysis and design practices.

19
System Analysis and
14.8
ComputerSUMMARY
Languages

There is a fundamental dilemma faced by anyone developing a computer application.

Most problems are so large they have to be split into smaller pieces. The difficulty
lies in combining the pieces back into a complete solution. Often each piece is
assigned to a different team, and sometimes it takes months to complete each
section. Without a solid plan and control, the entire system might collapse. Thousands
of system development projects have failed or been cancelled because of these
complications.

Partly because of the problems that have been encountered in the past, and partly
because of technological improvements, several techniques are available to develop
computer systems. The most formal approach is known as the systems development
life cycle. Most organizations have created their own versions of SDLC. Any major
company that uses SDLC also has a manual that is several inches thick (or
comparable online documentation) that lays out the rules that MIS designers have to
follow. Although these details vary from firm to firm, all of the methods have a
common foundation. The goal is to build a system by analyzing the business
processes and breaking the problem into smaller, more manageable pieces.

14.9 UNIT END EXERCISES

1. What are the different phases of traditional system life cycle?

2. What are the three phases of traditional system life cycle where users are
highly involved?
3. What are the various steps and deliverables in the development phase?
4. In which phase of system life cycle the following are performed? Defining the
problem, identifying its causes, specifying the solution, and identifying the
information requirements.
5. What are the three major areas of feasibility, which are addressed in system
analysis?
6. Which of the design lays out the components of the system and their
relationship to each other, as they would appear to users?

14.10 REFERENCES AND SUGGESTED

Alter Steven (1999), Information Systems (A Management Perspective),

Pearson Education.

Boyd Donald, W (2001), Systems Analysis and Modeling

(A Macro-to-Micro Approach with Multidisciplinary Applications)
Academic Press and Harcourt India.

Ghezzi Carlo, Jazayeri Mehdi and Mandrioli Dino (1991), Fundamentals of Software
Engineering, Prentice-Hall of India, New Delhi.

Pressman, Roger S. (2001), Software Engineering (A Practitioner’s Approach),

McGraw-Hill, New Delhi.

20
Computer Programming
UNIT 15 COMPUTER PROGRAMMING AND
and Languages

LANGUAGES
Structure

15.1 Introduction
15.2 Objectives
15.3 Programming Vocabulary
15.4 Control Statement or Control Structure
15.5 Overview and Features of Visual Basic
15.6 Overview and Deatures of Java
15.7 Overview and Features of HTML
15.8 Overview and Features of COBOL
15.9 Overview and Features of Excel
15.10 Summary
15.11 Unit-End Exercises
15.12 References and Suggested Further Readings

15.1 INTRODUCTION

As we know to solve a problem by computer we have to program the computers,

means we have to write a program for solving the problem. Program is a set of
instructions or statements written in any programming language. Programming
language is the only mean by which we can communicate with computer. Broadly we
can categorize programming language as low level language e.g. machine level,
assembly level, and high level language (e.g. BASIC, COBOL, C, Visual Basic,
JAVA etc.). Low-level languages are hard to learn and only be used by expert
programmer while high-level programming languages can also be learned by non-
computer professionals.

15.2 OBJECTIVES

After reading this unit, you should be able to :

• Explain the vocabulary used in programming languages;

• Identify and describe control structures in programming languages;

• Identify important features of Visual Basic, Java, HTML, Excel and COBOL;
and

• Write programs in higher level language.

1
System Analysis and
15.3
ComputerPROGRAMMING
Languages VOCABULARY
Suppose we want to write program for finding factorial of a number. The flow chart
and pseudo code for this will be as follows:

Input N

F
N >0

N =0 or T
N=1

Write 1

Write
“ Invalid Input”

Stop

Fig. 15.1 (a)

Line 1 : Input n
Line 2 : if (n>0)
Line 3 : if ((n=0) or (n=1))
Line 4 : Write (1)
Line 5 : else
Line 6 : Repeat
Line 7 : n=n*(n-1)
Line 8 : n=n-1
Line 9 : Until(n>0)
Line 10 : Write n
Line 11 : else
Line 12 : Write “Invalid Input”
Line
2 13 : end
Fig. 15.1 (b)
In writing above program we have used some important words such Computer
as if Programming
– then –
and Languages
else, repeat-until etc. Meaning inherent in these words form fundamental concepts in
programming. These words are called reserve words or keywords of a programming
language. To write program in any language is simply a matter of learning its syntax
and semantic rules and special features.

Apart from key words a program uses several other programming concept viz.
identifiers, constants, expression, library functions etc.

Identifiers
Identifiers are the name given to various program elements such as variables,
functions, sub-routines etc. Identifiers consist of letters and digits, in any order, except
the first character must be a letter.

Variables
Variables are those elements of program whose value can change during the
execution of a program.

Constant
Constant are those elements of program whose value cannot be changed during the
execution of the program. Means they have fixed value.

The numeric constant can be integer representing whole number or floating point
number with a decimal point. Constants would be probably the most familiar concept
to us since we have used them in doing everything that has to do with numbers.
Operations like, addition, subtraction, division, multiplication, and comparison can be
performed on numeric constants.

String constants are sequence of alphanumeric characters enclosed in double

quotation marks e.g. “Computer”, “X123”. String constant can be concatenated and
compared in a lexicographic sense.

Expression
An expression represents a single data item, such as a number or a character. The
expression may consist of a single entry. Such as constant, a variable, and array
element or a reference to a function. It may also consist of some combination of such
entities inter connected by one or more operators. Generally every high level
programming language provides some sets of arithmetical, relational, logical
operators. The most common arithmetical, relational, and logical operators are:

Arithmetical operator
* Multiplication
/ Division operators
– Subtraction operator
+ Addition operator

Relational operator
= Equal to
<> Not equal to
< Less than
> Greater than
<= Less than or equal to
>= Greater than or equal to
3
System Analysis
Logical Operatorand
Computer Languages
NOT Logical NOT operator simply negates a truth-value.
AND Logical AND operator return true if both operators are true
(e.g. (4<=8) and (a<=b) is true.
OR Logical OR operator return false if both operands and false.
XOR Exclusive OR is true only if one of the operand is true and other is
false.

Each operator has got some precedence associated with it and expression is always
evaluated on the basis of precedence of the operator e.g.

3+7*6-4/2–2 ↑ 4

In above expression exponential operator is evaluated first then multiplication and

division operators are evaluated and lastly the addition and subtraction operator are
evaluated.

The precedence of arithmetic operators is as below:

Exponential operator ↑ (highest precedence)
Negation –
Multiplication an Division */
Addition and subtraction +– (Lowest precedence)

Relational operators have same level of precedence among themselves but low
precedence than arithmetic operators. Logical operators have lower precedence than
relation operators. Among themselves they have the following order of priority during
evaluation of logical expression (logical expression is an expression evolving relational
or logical operators and evaluate either true value or false value)

NOT Highest precedence

AND
OR, XOR Lowest precedence

Expressions would be our basic workhorses. Our programs would be full of them,
and while executing the program; computer would be preoccupied most of the time to
evaluate them. But it would also be doing other things such as taking some values as
input from input device, assigning a value or result of an expression to a variable,
send a value for display to output device pondering to be or not to be on some
conditional expression, repeating some tasks until we are satisfied and calling some
slave – program to perform specific task. In the following discussion we shall
elaborate on these actions.

Generally every high level programming language has got some:

i) Built in data types

ii) Statements

4
Computer Programming
Programmin and Languages

Built-in Data Types

Int Chr Real

Input/Output Declarativ

Branching/ Selection Loop

Statement S

If – else
– end if Case For

5
System Analysis
Built-in andand statement type are specific to a particular programming
data type
Computer
language. Languages

Built in Data Types

Generally all programming language support following types of built in data viz.
Int. Whole number
Real Number with fractional part
Boolean Data type which is either ‘true’ or ‘false’
Char Single alpha number character enclosed in single quotation
mark e.g. ‘a’, ‘1’ etc.
String Group of characters enclosed in double quotation mark.
Before using any variable in the program it is generally necessary to define it’s type.
The memory requirement for each data type is different and it is dependent upon the
specific programming language.

Statements
Statement in programming language can be broadly classified as follows:
i) Declarative statements
ii) Input output statement
iii) Assignment statement
iv) Control statement or control structure.

Declarative Statements
These statements are used to declare the type of the variable e.g.
In Java
Int x : is of integer type variable
Char x : is character type variable
Byte b : b is of byte type variable
Float y : y is of float (real) type variable
In Visual Basic
Dim x as Integer : x is integer type variable
Dim b as Byte : b is byte type variable
Dim y as Single : y is of floating (real) type variable
Input Output Statement

They can be broadly classified as:

i) Console input statement
ii) File input statement
iii) Console output statement
iv) File output statement

Console input is used for taking the input from default input devices (e.g. line 1 of
Figure 15.1(a)) while console output statement is used for printing the result of the
program on default output device (e.g. line 4, line 10, line 12 of Figure 15.1(b)).
Similarly file input statements are used for taking the input from file or non default
input device while file output statement is used for writing the output into the
specified file.
6
Assignment statements are used for assigning the value to variable e.g. variable
Computer Programming
name = value to be assigned. and Languages

X = 123 : value 123 is assigned to x and x is of integer type variable

Z = func1( ) : What so ever value return func1( ) will be assigned to variable
z. The type of z and type of value returned by func1( ) should
of same type.

15.4 CONTROL STATEMENT OR CONTROL

STRUCTURE

The execution of computer program is always sequential i.e. statement which is

written first will be executed first. To change the sequential execution of a program
we need control structures, which can be broadly categorized as follows:
i) Branching or selection statement
ii) Looping or Iterative statement
iii) Jump statement
i) Branching or Selection Statements are used to select one group
of statements or single statement for execution from several available
groups of statements. The selection of a particular group depends on
some Boolean condition.

If – then – else

This statement used when we have to make selection from two available groups of
statements. S1 group of statements will be only executed if Boolean expression true
otherwise s2 group of statement will be executed.

If < Boolean expression >

S1 statement (s)
Else
S2 statement (s)

Entry

Boolean
Expression

F T

Group S2 Statements Group S1 Statements

7
System statement
CASE Analysis and
is used if we have to make selection from several available group of
Computer
statement Languages

Case (expression R)
{ Case x : S1
Case y : S2
Case w : S3
Case z : S4
………………………..
………………………..

default : default statement

Here x, y. z ….w are permissible values for expression – R. If expression – R

evaluates to y then S2 group of statements will be executed if expression – R evaluates
to non-permissible values then default group of statements will be executed.

Expression R

Expression-R = X
s1

Expression-R = X
s2

no match default case

ii) Looping / Iterative Statement : A computer is well suited to perform

repetitive operations. It can do it tirelessly. Every computer language must have
features that instruct a computer to perform such repetitive tasks. The process
of repeatedly executing a block of statements is known as looping. The
statements in the block may be executed any number of times, from zero to
infinite number. If a loop continues forever it is called an infinite loop. Finite loop
8
is a loop, which terminates after fixed number of iterations.Computer Programming
These fixed number
and Languages
of iterations are knows to us in advance for implementing finite looping we use
for loop structure:

For Variable x = Value1 to Value 2 step values

S1
S2 Body of the loop
S3
Sn
End
In this case variable is initialized to value1, then it is check whether the value of
variable is greater value 2. If not then execute the body of the loop and then increase
the value of variable by step size equal to value 3.

If we do not know in advance how many times the loop will iterate then we use while
– loop or repeat – until structures. There types of loops are terminated by some
Boolean expression. The body of these loops must contain one statement that alters
the value of the Boolean expression.

While < Boolean expression>

S1 Body of the loop containing a
S2 statement which alters the Boolean
S3 expression

Sn
Wend

Boolean
Expression

T F
Execute Body of Loop

Repeat
S1
Body of the loop containing
S2 a statement which alters
S3 the Boolean expression.
Sn

Until <Boolean expression>

9
ItSystem Analysis
is clear andflow chart of while loop and repeat – until loop that body of repeat
from the
Computer Languages
until loop will always executed at least for one time.

iii) Jump Statement : Go to, break and continue are generally the jump
statements. Go to statement is used for jumping from one location to another
labeled location within the program. Break statement causes the loop to be
terminated, the continue statement causes the loop to be continued with the next
iteration after skipping any statements in between.

Functions/ Sub-routine/Sub program/Modules

There are two ways to write a large and complicated computer program. One is to
write the single program, if we can, which are normally very difficult for a large and
complicated program. The other is to look at the large program as consisting of
several somewhat less complicated subprograms. Coping with each of the
subprogram can be seen in the same manner as main program, either write them
directly, if we can, or refine it in terms of further subprograms and so on. The
process of breaking large and complicated programs in smaller and less complicated
sub program is known as modular programming approach. Each subprogram is
termed as function, subroutine, module etc. depending on the specific programming
language used to write the program.

Table 15.1: Languages Used in Different Applications

Application Type Language used

1. General purpose programming C, C++, Pascal, JAVA, Visual C++

2. GUI (Graphical User Interface) Visual Basic

3. Database Management Front end: Visual Basic

Back end: Oracle, MS-Access, SQL Server

4. Artificial Intelligence LISP, Prolog, Ada

5. Web Page Design/ Web

enabled services HTML, DHTML, XML, JAVA Applet, ASP etc.

15.5 OVERVIEW AND FEATURES OF VISUAL BASIC

The following points make Visual Basic an excellent development tool:
1. Visual basic applications are event driven. Even driven means the user is in
control of application. The user generates a steam of events each time he or
she clicks with the mouse or processes a key on the keyboard. Visual Basic
application responds to those events through the code, you have written and
attached to those events.

2. Visual Basic supports the principles of Object-oriented design. This means that
you can compartmentalize different aspect of your application as objects and
develop and test those objects independently of the rest of the application.

3. Microsoft has designed Visual Basic to be a complete windows application

development system. This means that your visual basic applications will look
and behave like other windows program.
10
4. Computer
Visual Basic is infinitely extensible through the use of Active Programming
X controls,
dynamic ally linked libraries (DLLs) and add-ins. You can create theseLanguages
and Active
X controls, DLLs, and add-ins with Visual Basic 6 or buy them off the shelf
from a large number of third party software vendors.

Visual basic program development overview

Visual Basic developers follow the following steps to develop a program:
1. Design and build the user interface
2. Write code that responds to events
3. Create and call other procedures and needed
4. Compile the program
5. Convert to runtime version
6. Prepare distributable set of files

Design and
Build User
Interface

Write Even
Driven Code

Create and Call

other
Procedures

Visual Basic
Compiler

Convert to
Runtime and
Prepare
Distribution File

As we work with Visual Basic to produce our windows application, we create

several different files. An .FRM file contains the specifications and code associated
with a single form within the application and a .BAS file contains only Visual Basic
code. After we are satisfied with the design and operation of your Visual Basic
application we can compile it into a distributable version. During the compilation
process Visual Basic combines the information contained in the form file and code
modules into a single executable file with an .EXE filename extension. The .FRM and
.BAS files remain on the disk to enable up to continue making changes and
improvements to the application. The figure below shows the schematic of the
compilation process

As we work with Visual Basic to produce our windows application, we create

several different files. An .FRM file contains the specifications and code associated
with a single form within the application and a .BAS file contains only Visual Basic
code. After we are satisfied with the design and operation of your Visual Basic
application we can compile it into a distributable version. During the compilation
process Visual Basic combines the information contained in the form file and code
modules into a single executable file with an .EXE filename extension. The .FRM and
.BAS files remain on the disk to enable up to continue making changes and
improvements to the application. The Figure below shows the schematic of the
compilation process
11
System Analysis and
.VBP file
Computer Languages

.FRM file

Visual Basi

.BAS file

The .VBP file at the top of the diagram is the Visual Basic project file. This file
contains references to all the components of the project and is not actually compiled
into .EXE file.

A Visual Basic executable requires a large runtime module named MSVBM60.DLL.

Usually MSBVM60.DLLis placed into the windows system directory as Visual Basic
is installed.

Table 15.2: Build-In Data Types of Visual Basic

Data Type Storage Requirement Range

Byte 1 byte 0 to 255

Integer 2 bytes -32,768 to 32,767

Long 4 bytes -2,147,483,648 to 2,147,483,647

Single 4 bytes For –ve values
-3.402823E38 to –1.401298E-45
For + ve values
1.401298E-45 to 3.402823E38

Double 8 byte For –ve values

-1.79769313486232E308 to
-4.94065645841247E-234
For +ve values
4.94065645841247E-234 to
1.79769313486232E308

Currency 8 bytes -922,337,203,685,477.5808 to

922,337,203,685,477.5807

Boolean 2 bytes True or false

Date 8 bytes January 1,100 to December 31,9999

Object 4 bytes Reference to any type of object

String Varies 0 to Billion

Variant Varies Same range as any numeric
12 or string dates type.
Control statement of Visual Basic Computer Programming
and Languages
Following types of conditional branching statement is present in Visual Basic
i) If – then – end
ii) If – then – else
iii) If – then – Else if - End if
If- then is most common conditional branching statement. This is simplest and
illustrated below. Syntax of If- then – end is
If expression then
Statement(s)
End if
Statement 1

If Then Optio
Expression Stateme

Statement

The optional statement block is executed only when expression is true. Regardless of
the value of the expression, execution continues after the if statement with statements.
If then else is used when certain statements execute only when the expression is true
other statements execute if the expression is false

Statement 1

If Else Sta
Expression If e
i

Than
Statement(s)
If expression
is true

End if

Statement 2
13
SystemSyntax:
Analysis and
Computer Languages
If Expression Then
Statements(s)
Else
Statements(s)
End if
The final extension of if then End if branch is diagrammed below:

Statement-1

If Else If Else If
Expression 1 Expression 2 Expression n

Then Then Then

Statement(s) if Statement(s) if Statement(s) if
Expression-1 is Expression-2 is Expression-n is
True True True

End if

Statement-2

Syntax:
If expression 1 then
Statement(s)
Else if expression 2 then
Statement(s)
:
:
:
Else if expression n then
Statement(s)
End if

14
Computerand
The select case branch is used in place of nested if then else statements Programming
is easy
to understand and is diagramed below: and Languages

Select Case
Expression

Case Stateme
Value 1

Case Statemen
Value 2

Case Stateme
Value n

End Case

Syntax:
Select Case Expression
Case value 1
Statement(s)
Case value 2
Statement(s)
:
:
:
Case value n
Statement(s)
Else Case
Statement(s)
End Select

15
System Analysis
Looping and
Constructs of Visual Basic
Computer Languages
The For… Next is useful whenever we know how many times loop through the
statement block

Syntax

For var = initial value to final value

Statement 1
:
:
Statement n
Next var

Initialize var to initial value

Var> Final
Value

Yes No

Execute body of program

Do – Loop executes a block of statements for as long as a condition is true. There

are two variations of the Do – Loop statements, but both use the same basic model.

The loop can be executed either while condition is true or until the condition becomes
true. The two variations of the Do – loop use the keywords while until to specify how
long the statements are executed. To execute a block of statements while a condition
is true, use the following syntax:

Do while condition

Statement block

Loop

To execute a block of statements until the condition becomes true use the following
syntax:

Do Until Condition

Statement block

Loop

16
Computer Programming
15.6 OVERVIEW AND FEATURES OF JAVA and Languages

Java is a general purpose, object – oriented language developed by Sun

Microsystems of USA in 1991. The most striking feature of the language is that it is
platform – neutral language. Java is the first programming language that is not tied to
any particular hardware or operating system. Programs developed in Java can be
executed anywhere on any system. The important feature of Java is as under:
1. Compiled and Interpreted
2. Object Oriented
3. Distributed
4. Multi threaded
Usually, computer language is either compiled or interpreted. Java combines both
these approaches thus making Java a two-stage system. Java compiler translates
source code into what is known as byte code instruction. Byte codes are not machine
instructions and therefore, Java interpreter generates machine code that can be
directly executed by the machine that is running Java program.
Java is a true object oriented language. Almost everything in Java is an object. All
program code and data reside within objects and classes.
Java is designed as a distributed language for creating applications on networks. It
has the ability to share both data and programs. Java applications can open and
access remote objects on Internet as easily as they can do in a local system. This
enables multiple programmers at multiple locations to collaborate and work together
on a single object.

Multithreaded means handling multiple tasks simultaneously. Java supports

multithreaded programs. This means that we need not wait for the application to
finish one task before beginning another e.g. we can listen to an audio clip while
scrolling a page and at the same time downloaded an applet from a distant computer.
Java does not support multiple inheritance and pointers.

Java Environment
Java environment includes a large number of development tools and hundreds of
classes and methods. The development tools are part of Java Development Kit
(JDK) and classes and methods are part of Java Standard Library (JSL).
Main Java Development tools are as follows:
Table 15.3: Java Development Tools

Tools Description

Appletviewer Enables us to run Java applets (without actually using a Java

compatible browser).

Java Java interpreter, which runs applets and application by reading and
interpreting byte codes.

Javac The java compiler, which translates Java source code to byte code
files that the interpreter can understand.
Javadoc Creates HTML format documentation from Java source code file.
Javah Produces header file for use with native methods.

Javap Java disassembler, which enables us to convert byte code files into
a program description.
Jdb Java debugger, which helps us to find errors in our programs.
17
System
The wayAnalysis and are applied to build and run application program is show below in
these tools
Computer
the figure Languages

Java Source
Javadoc
Code

Javac

Java Class
File Javah

Java Jdb

Java Program Output

Java Program
Source Code Java Compiler

Byte Code Java Interpreter

Java standard library includes hundred of classes and methods grouped into six
functional packages.
1. Language Support Package: Collection of classes and methods required for
implementing basic features of Java.
2. Utilities Package: A collection of classes to provide utility functions such as
time and date.
3. Input /Output Package: A collection of classes required for input/output
manipulation.
4. Networking Package: A collection of classes for communicating with other
computer via intranet or Internet.
5. Awt Package: The abstract window tool kit package contains classes that
implements platform independent graphical user interface (GUI).
6. Applet package: This includes a set of classes that allow us to create java
applets. Applets are small java programs developed for intranet/ Internet
applications.
An applet located on a distant computer (server) can be downloaded via internet/
18
intranet and executed on a local computer (client) using a java capable browser
Structure of Java program Computer Programming
and Languages
A java program may contain many classes of which only one class defines a main
method. A class contains data members and methods that operate on the data
member of the class. A java program may contain the following sections:
Documentation section Suggested
Package Statement Optional
Import Statement Optional
Interface statement Optional
Class definitions Optional
Main method class Essential
All Java source files will have the extension Java, also if a program contains multiple
classes, the file name must be the class name of the class contains the main method.

Table 15.4: Build-in data types of JAVA

Data Type Storage Requirement Range
Byte 1 byte -128 to 127
Short 2 byte -32,768 to 32,767
Int 4 bytes -2,147,483,648 to 2,147,483,647
Long 4 bytes -9,223,372,036,845,775,808 to
9,223,372,036,845,775,807
Float 4 bytes 3.4e –038 to 3.4e +038
Double 8 byte 1.7e – 308 to 1.7e +308

Control Statements

The if-else statement in java may be implemented in following different form

depending on the complexity if condition to be tested:
i) Simple if statement
ii) If-else statement
iii) Nested if-else statement
iv) Else if ladder
If (expression)
{
Statement(s)
}
Statement x

Expression

True

Statement x
False

Statement x

19
SystemIfAnalysis and
(expression)
Computer Languages
{
True – block statement(s)
}
else
{
False – block statement(s)
}

Statement – x

True False
Expression

True-Block False-Block
Statement Statement

Statement x

If (Condition-1)
Statement – 1;
Else if (Condition – 2)
Statement – 2;
Else if (Condition – 3)
Statement – 3;
............................................
............................................
............................................
Else if (Condition – n)
Statement – n;
Else
Default statements;
Statement – x

Activity A
1. What are the different types of conditional branching statement sin Visual basic?
.....................................................................................................................
.....................................................................................................................
.....................................................................................................................
2. Describe the six functional packages in JAVA progam library.
.....................................................................................................................
.....................................................................................................................
20 .....................................................................................................................
Computer Programming
and Languages

T Condition-1 F

Statement-1
T Condition-2 F

T F
Statement-2
Condition-3

T F
Statement-3 Condition-n

Default
Statement-n
Statement

The Java language provides three constructs for performing loop operations viz
While loop
Do loop
For loop
In the while loop test condition is evaluated and if the condition is true, then body of
loop is executed as illustrated in the Figure below:
Syntax:
Initialization
While (Condition)
{
Body of loop
}

F
Condition

T
Body of Loop

21
System
In Analysis and
do statement test condition is evaluated the bottom of the loop hence resulting at
Computer Languages
least one time execution of the body of the loop irrespective of the value of test
condition:
Syntax:
Initialization
Do
{
Body of loop;
} While (condition)

Body of Loop

F
Condition

T
The for loop is used when we know in advance how many times the loop will run.
The syntax is:

For (initialization; test condition; increment)

{
Body of loop;
}

Initialization of Control
Variable

Test F
Condition

T
Initialization of Control
Variable

22
Computer Programming
15. 7 OVERVIEW AND FEATURES OF HYPERTEXT
and Languages

MARKUP LANGUAGE

As a web information provider, we prepare documents in a markup language known

as Hypertext Markup Language (HTML). HTML is not a page description language
(like Past Script). With HTML, we can describe the structure of our web documents,
including related information such as the integration of multimedia and use of
hyperlinks. It also links java applets to our web site.

HTML is actually a subset of an internationally known standard called Standard

Generalized Markup Language (SGML). The advantage of HTML is that we can
create its documents with simple ASCII text editor, which is not always true for
document based on SGML. HTML defines documents so that any browser running
on any computer can read a display them.

The basic HTML commands that are needed to create web pages fall into following
categories:

Structural Command
These identify a file as an HTML document and provide information about the data in
the HTML file.

Paragraph formatting Command

These specify paragraph endpoints and heading levels.

Character formatting Command

These allow us to apply various styles to the characters in our documents.

List specification Command

HTML supports several list formats including bulleted numbered and definition list.

Hyper linking command

These allow us to provide information about moving from one document to another.

Assest interaction command

These allow us access to multimedia information. Through these commands, we can
display graphical images, access sound and provide digital movies for users.

The body of any HTML document is as under:

<HTML>
<HEAD>
<TITLE> This is document title </TITLE>
</HEAD>
<BODY>
:
:
:
This is document text
23
System: Analysis and
Computer Languages
:
<BODY>
</HTML>
HTML file has .HTM or .HTML as their file name extension.

Activity B

A Principal wants to make a web site for the information of parents so that they can
get information of their progress of their ward in the school as well about various
schemes of the school.
1. Make a diagram for the website.
2. Which language would you prefer for that website.
.....................................................................................................................
.....................................................................................................................
.....................................................................................................................
.....................................................................................................................
.....................................................................................................................

15.8 OVERVIEW AND FEATURES OF COBOL

COBOL is a compiler language that is commonly used to solve data processing in

commercial organization. COBOL is not suitable for scientific purpose programming.
COBOL is the abbreviation of Command Business Oriented Language.

COBOL source program is written in Code sheet. In the coding sheet each line has
five following zones:
i) Columns 1-6 : used for sequence number
ii) Column 7 : used for continuation mark an
asterisk (*) mean comment

iii) Column 8-11 : Margin ‘A’ entries

iv) Column 12-72 : Margin ‘B’ entries
v) Column 73-80 : User for writing identification of
program
There are four division in any COBOL program
IDENTIFICATION DIVISION
ENVIRONMENT DIVISION
DATA DIVISION
PROCEDURE DIVISION
Each division may have several sections. Each section may have several paragraphs.
Each paragraph may have several sentences. Each sentence may have several
statements. Usually, a statement is terminated by a comma (,) or a period (.).

Division heading, section names paragraphs names, level numbers are usually margin
B entries.
24
Identification Division Computer Programming
and Languages
This is the first division of every COBOL program. It has no direct effect on
the execution of the program.
IDENTIFICATION DIVISION
PROGRAM-ID. <Program Name>
[ AUTHOR. <author Name> ]
[ INSTALLATION. <name of installation>]
[ DATE-WRITTEN. <date>]
[ DATE-COMPILED <date>]
[ SECURITY. <status of security>]
[ REMARKS. <remarks or comments>]

The words enclosed with < > are to be understood as generic terms referencing the
COBOL language items. The word enclosed within [] are optional and those
enclosed with { } are understood to be alternatives.

In identification division the paragraph PROGRAM-ID is essential. The other

paragraphs are optional and machine dependent.

Environment Division

This is the second division of a COBOL program and is mostly machine oriented. It
contains information regarding the equipments to be used for processing the program
and has two section viz. Configuration Section and INPUT-OUTPUT Section. The
structure of this division is as under:
ENVIRONMENT DIVISION.
CONFIGURATION SECTION.
SOURCE-COMPUTER. <source computer name>
OBJECT COMPUTER <object computer entry>
[SPECIAL-NAMES. <special name entry>]
INPUT-OUTPUT SECTION.
FILE-CONTROL. <file control clauses>
[I-O CONTROL. <input-output control entries>.

Data Division

This division of a COBOL program is used to describe every data item to be

processed by the program instructions in the PROCEDURE DIVISION. The input
output files, which are named in the Input-Output Section or the Environment
Division, are described in detail in the File Section of the Data Division. Another
section in this division is the WORKING STORAGE SECTION in which all fields of
the data item, which are required for internal processing but are not part of input
output, are described.
DATA DIVISION.
FILE SECTION.
FD <file name>;
RECORDING MODE IS <mode>

25
System Analysis
[BLOCK and
CONTAINS
Computer Languages
[<integer> TO] <integer>
{ RECORDS
CHARACTERS] }
[; LABEL { RECORD is } {Standard}
{RECORDS are} {Omitted}
[;RECORD CONTAINS [<integer> TO] <integer> CHARACTERS]
[; VALUE OF <data-name IS {data-name} {literal}
[,<data-name> IS {data-name {literal}]
[; DATA {record IS} <data-name> [‘,<data-name>….]

Working Storage Section

Procedure Division

This division contains the actual instruction for manipulation and processing of data
with the help of executable statements. This division is usually organized into several
paragraphs. A paragraph start with a paragraph name, followed by a period and one
or more sentences. A COBOL instruction is a valid combination of verbs and
phrases. There are three categories of COBOL statements:
a) Imperative statements, which always start with a verb e.g. ADD, MOVE,
READ, WRITE etc.
b) Conditional Statement, which direct the computer to find the truth value of a
condition and take subsequent branching to one of the alternative paths
depending upon the truth value. If statement is one such conditional statement.
c) Compiler directing statements, which direct the COBOL compiler at the time of
compilation and does not generate any instruction in the object program.

15.9 OVERVIEW AND FEATURES OF EXCEL

Microsoft Excel is a program specially designed to enter organized data as well as to

analyze and present the data attractively. Excel is one of the most versatile and
popular spreadsheet programs. It serves as an, electronic pad for accountants. It an
easily perform simple as well as complex mathematical operations. Spreadsheet is a
simple worksheet consisting of rows and column in which any data can be entered
e.g. report cards of students are manual spreadsheet. An electronic spreadsheet
instead of being on papers, it is on the computer screen.

Spreadsheets are used for performing calculations, recalculating results if any data
stored in them is changed, creating financial reports, comparing reports etc. A very
useful feature of spreadsheet is its ability to create groups. It helps you establish
relation-ship between two or more sets of data and easily understand the trends of
data changes.

A spreadsheet consists of rows and columns, which combine to form cells. A Cell is
a box where we can enter data. Column form the vertical lines of calls while rows
form the horizontal line of cells. Cell is an intersection of rows and columns. To
describe the location or address of a cell, we have to write the names of the column
and the row whose intersection has created this cell.

26
Computer Programming
Rows Columns
and Languages

A B C
1
2 Cell B3
3
4
5

Cell B3 is location of address of this cell, which means column B, & row 3.

Labels are the headings, which we enter in cell. Values are the number on which
calculations are performed. Formulas and functions are elements that perform the
desired calculations on the values.

Value
A B C D E
1 Profit in months
2
3 Export 1,200 1,600 1,479
4 2,200 1,785 2,100
5
6 Total 3000 C3+C4 3,579

Label Formula or Function

Formulas, which are present within the spreadsheet itself, are called functions. We
can also put up our own formulae in any cell. In the above figure cell B6; C6 and
D6 contain the formula, which total the values of export and import.

A major drawback of the manual spreadsheet is that if any data in it changes, we

have to redo all such calculations that are affected by the data change, but an
electronic spreadsheet automatically performs all such calculations for us. All we
have to do is just change the data and the rest is taken care of by the spreadsheet.

A spreadsheet can be designed in a number of formats. Basically, designing is

concerned with how a number should look on the screen. The various designing
formats are comma, percent, currency, scientific. The data in a cell may be right
aligned, left aligned or centered.

Exam Left-aligned

Exam Right-aligned
Exam Centered

Spreadsheets allow us to use different fonts and styles to emphasize headings.

Graph is yet another powerful feature of spreadsheet. The data stored in the
spreadsheets can be converted into graph so as to study the relationship various data.
The spreadsheet program has the facility to draw various graph viz. Bar, Pie,
2D and 2 D graphs.
27
System Analysis and
15.9 SUMMARY
Computer Languages

In this unit we have explained the concept and fundamental of programming

languages. We have also explained the different type of data types and looping
statements available in Visual Basic and Java programming language. We also learn
how to compile and run programs in above programming languages.

15.10 UNIT END EXERCISES

1. Explain the concept of programming language. Explain identifiers, constants,
expressions, and library functions.
2. Give points to support that Visual Basic is an excellent development tool.
Highlight important features of VB.
3. Java is not 100% pure object oriented language? Do you agree or not? Justify
your answer.
4. What do you understand by HTML? Present the features of HTML.
5. “Excel is a versatile spreadsheet package. It can do wonder for accountants”.
Comment.
6. “With so many ready made and customized software available-The need for a
manager is to learn to use them effectively rather than learn to program them.”.
Do you agree?
7. What makes Java an almost perfect web programming language? What are its
disadvantages?

15.11 REFERENCES AND SUGGESTED FURTHER

READINGS

Sebesta, Concepts of Programming Languages, 4e, Pearson Education.

Terrence W. Pratt, Marvin V. Zelkowitz , Programming Languages:
Design And Implementation, 4th Ed., Prentice-Hall of India.
Tucker, Allen, Programming Languages Principles and Paradigms,
Tata Mc Graw-Hill

28
UNIT 16 DATABASE RESOURCE
MANAGEMENT
Structure
16.1 Introduction
16.2 Objectives
16.3 Data as Organizational Resource
16.4 Organizing Data
16.5 Database Management Systems and its Components
16.6 Modelling Data
16.7 Data Types
16.8 Developments in Database Technology
16.9 Database Administrator and the Role
16.10 Critical Success Factor of Data Warehousing
16.11 Summary
16.12 Unit End Exercises
16.13 References and Suggested Further Readings

16.1 INTRODUCTION

A university uses a database to keep student records, large libraries uses a database
system to keep track of library and to provide various types of indexing to material by
subject, title, author etc. and a bank uses database system to keep records of its
customers, employees, loans etc. and many more. Businesses normally use a
database to keep records of its employees, sales, production etc. All those who keep
a collection of records for a common purpose, uses a database. Therefore, a
database system is a collection of programs, which allows storage, modification, and
manipulation of information from a database. It is a layer of software between the
physical database and the user.

16.2 OBJECTIVES

After reading this unit, you should be able to:

• Describe the concept of a Database Management System (DBMS);
• Describe the importance of data in organizations;
• Explain the role of database administrator in DBMS; and
• Identify the factors responsible for the success of Data Ware Housing.

16.3 DATA AS ORGANIZATIONAL RESOURCE

Before the computer came into existence, there were many limitations associated
with the physical handling of documents and human processing. Computers came into
existence to speed up the data processing. Computers helped to manage data.

We are living in the age of information processing. The ability to acquire accurate and
timely data, managing data efficiently, is all through which an organization succeed. 1
The development in hardware has catalysed rapid development in software and now
we are having more sophisticated software to handle data as it was earlier.

The term data and information are often taken as to mean the same thing. Data are
the details about factories, outlets, staff, competitors, customers and suppliers. Data is
also kept for monitoring the activities and processes in business. Once businesses
collect these details, information comes into picture. Information is the collection of
meaningful facts that are derived from the data. Information is significant and
relevant to the user unlike data, which has no meaning alone. Information leads to
decision and thus an appropriate action. In fact, information consists of only the data
that is useful, meaningful and needed. You come across many information systems in
you daily life like banking information system, ticketing and reservations systems etc.
Now what you get out of these information systems is pure information and these
systems work out this information on the basis of data. In other words, data is raw
and information is refined. The exact form of the refinement depends on the type of
application one is dealing with.

The data must be accurate, timely and relevant. It is desired that any information
system should have accurate data to work on. Inaccurate data howsoever well
analysed will hardly be useful for any decision-making. Although collection of
accurate data is costly and time consuming, every effort should be made to make it
as accurate as possible. One may strike a balance between the cost of processing
and value of accuracy. The data should also be timely. If the right data is not
available at the right time then it is worth little use. For example if the updating of
electoral lists cannot take place before the schedule of elections then it is of no use to
the elections. The timeliness of the data is detrimental of success of any information
system. The data should be relevant. For better understanding of the organizations
and their information needs data has to be high on the relevance factor. There are
many decision-support systems (DSS) and executive support systems that are
present in today’s scene, but the general feeling is that often the data is generating
accurate and timely information, that is not very relevant. However, the future looks
bright because of the emergence of high-end computing machines, sophisticated data
capturing devices and other technology driven tools. Technology is making data
available in larger quantities than ever before, due to lower cost storage, increased
processing speeds, higher capacity communications and increased variety of
information formats.

16.4 ORGANIZING DATA

In earlier times, data processing was done manually. Organizations appoint a large
number of people called clerks. The information technology devices used at that time
was forms, ledger books and basic mechanical adding machines. The results of such
manual operations were obtained at a time when the information was almost out of
date (e.g. census). Then some systems were invented in which processing was
mostly mechanized e.g. Hollerith Tabulation System. In such systems data was
recorded in the binary form of holes in cards, using a cardpunch. These stacks of
cards could be sorted and tabulated. IBM and Remington Rand led the development
of punched card technology.

Things have changed considerably with the advent of computers. There are a few
terms that you need to know about the data organization. IT-specific encyclopedia of
whatis.techtarget.com and searchdatabase.com defines theses terms as follows:

Bit: A bit (short for binary digit) is the smallest unit of data in a computer. A bit has a
single binary value, either 0 or 1. Although computers usually provide instructions that
can test and manipulate bits, they generally are designed to store data and execute
2
instructions in bit multiples called bytes. In most computer systems, there are eight
bits in a byte.

Byte: In most computer systems, a byte is a unit of data that is eight binary digits
long. A byte is the unit most computers use to represent a character such as a letter,
number, or typographic symbol (for example, “g”, “5”, or “?”). A byte can also hold a
string of bits that need to be used in some larger unit for application purposes.

Field: A field is an area in a fixed or known location in a unit of data such as a

record, message header, or computer instruction that has a purpose and usually a
fixed size. In some contexts, a field can be subdivided into smaller fields. In a
database table, a field is a data structure for a single piece of data. Fields are
organized into records, which contain all the information within the table relevant to a
specific entity. For example, in a table called customer contact information, telephone
number would likely be a field in a row that would also contain other fields such as
street address and city. The records make up the table rows and the fields make up
the columns.

Record: In a database, a record (sometimes called a row) is a group of fields within

a table that are relevant to a specific entity. For example, in a table called customer
contact information, a row would likely contain fields such as: ID number, name,
street address, city, telephone number and so on.

File: In data processing, using an office metaphor, a file is a related collection of

records. For example, you might put the records you have on each of your customers
in a file. In turn, each record would consist of fields for individual data items, such as
customer name, customer number, customer address, and so forth.

Database: A database is a collection of information that is organized so that it can

easily be accessed, managed, and updated. In one view, databases can be classified
according to types of content: bibliographic, full-text, numeric, and images.

In relation to database, an entity means a person, place, or thing that we wish to

collect information on (e.g. customers). The word root is from the Latin, ens, or
being, and makes a distinction between a thing’s existence and its qualities. Attribute
is a characteristic of an entity (e.g. customer’s salary, customer’s address).
In a database management system (DBMS), an attribute may describe a component
of the database, such as a table or a field, or may be used itself as another term for a
field. Key Field is a special field that uniquely identifies a single record
(e.g. customer’s registration number). It can be a collection of fields.

In a database management system (DBMS), files are either organised sequentially

(one record after another, used for batch processing) or organised in an indexed
sequential form (in sequence, but records can be directly accessed using an index) or
in the form of direct or random form (records located using a key field generated by
a mathematical formula.)

16.5 DATABASE MANAGEMENT SYSTEMS AND

ITS COMPONENTS

We have discussed earlier that an organization must have accurate and reliable data
for effective decision-making. For this, the organization maintains records by
combining the data from different sources in an organization. Database is a collection
of related information stored along with the details of interpretation of the data
contained. For managing the data in the database we need a system called Database
Management System. In other words, DBMS is a complex piece of software that 3
facilitates a flexible management of the data. Through DBMS we can access,
monitor, store and modify the database. Through DBMS data can be made available
to all users and redundant (duplicate) data can be minimized or completely eliminated.
DBMS also makes possible for an organization to prevent important data access from
unauthorized users by providing the security to the database at different levels. Some
of the DBMS that are used are INGRES, ORACLE, SQL Server and SYBASE.

The DBMS allows users to access data from the database having no knowledge of
how data is actually stored in it. The process is much the same as ordering a menu in
the restaurant. A customer simply orders for the food to a waiter and waiter serves
the specified order. A customer only checks the menu for the desired items and need
not know how the items are arranged in a restaurant. Similarly, the database user
need not know how the data is stored instead he needs to know only what he requires
and the DBMS takes care of retrieving the required data on its own.

Lets look into the components of DBMS:

DML Precompiler (Data Manipulation Language Precompiler): As its name

specifies, this is a compiler that converts DML statements (Statements that allows
the users to manipulate the database) in an application program into normal procedure
calls in the host language. This precompiler must interact with the query processor
(discussed later) in order to generate the appropriate code.

DDL Compiler (Data Definition Language Compiler): The DDL compiler

converts the data definition statements (statements that define the tables, database
etc.) into a set of tables. These tables contain information in the form that can be
used by other components of the DBMS.

File Manager: File manager manages the structure and space of the file on disk.
This also locates the block in which the required record exists and requests from the
disk manager for this block containing the required record and finally provides the
required record to the data manager.

Disk Manager: As specified earlier, disk manager provides the block or page that
the file manager asks for. The disk manager is a part of Operating System. Disk
Manager does all the physical input and output operations.

Data Manager/Database Manager: It is also called database control system. It is

a software component of the DBMS or we can say a program module that acts as an
interface between the data stored in the database and the queries submitted to the
system. Data Manager converts the queries from the user into the file system. It is
actually responsible for the storage, retrieval and manipulation of the data in the
database. Besides these responsibilities data managers also takes care of maintaining
integrity. This means that the appropriate data should be stored in the database. For
example, date of joining of an employee should not be less than the current date or
the age of an employee for a particular post should lie between 25 and 40. If these
constraints are specified in the database, then database manager takes care of them
on its own. Database Manager also checks for an unauthorized user accessing the
database. Database Manager does not allow any user to access the database without
having the permission granted.

Query Processor: The Query Processor takes care of the queries by the database
user. The database user when uses the Data Manipulation Language (DML) for
retrieving the data, the Query Processor converts it into that form that could be sent
4
to the Data Manager, so that Data Manager can execute it.
Data Dictionary: A data dictionary contains the information/ data about the data. A
data dictionary includes all the database descriptions, entity/ table descriptions,
attributes etc. Apart from these data dictionary includes the information about the
users also, which tables are used by which programs, authorization of users. A data
directory/ dictionary is just like a database and its cost depends on how complex it is?
More complexity leads to increase in cost. Just like an index helps us to find the
chapter easily, data dictionary helps DBA for designing, implementing and maintaining
the database and searching for the desired record in the database. It also helps the
managers and end users in their project planning.

16.6 MODELING DATA

As we have discussed earlier that any organization needs to store the information and
this is done through database. Data models refer to the conceptual model of the data
and the underlying relationships among them. DBMS abstract some generic
structures to represent conceptually every possible file structure.

Data models can be classified in two classes viz; Record-based logical Models and
Object-based logical models. Record-Based logical data models can be classified
(Sadgopan, 1997) into the following categories:

Hierarchical Models: These are the early data models used in 1970’s.
Hierarchical models capture the intuitive hierarchy of the data elements. The early
generation of large DBMS e.g. IMS belongs to the hierarchical data models. Even
today some large databases are maintained on IMS platform.

Network Models: Since hierarchical models are unable to represent data items that
existing at two different level of hierarchy, network models were proposed. The
notable systems built using this model were ADABAS and DBMS-10 on DEC-10
machines.

Relational Models: Though network models were quite powerful, they lacked in
elegance. The systems built on this data model were dBase, Xbase and ORACLE.
Almost all commercial systems presently available like Oracle 8i, 9i, 11 etc., SQL
Server, MySQL are built on the relational models. There are 12 rules that are
required to be followed in a relational model.

Data modelling is achieved in two levels:

1) E-R modelling that builds the conceptual model of the data.
2) Normalization, which removes the redundancies.
Object Oriented Logical Models can be of several types. One of them is Entity
Relationship model. The Entity Relationship (ER) data model is the most common
data model which is based on the perception of the real world.. This model allows us
to represent the relationships among the objects called entities. It uses following three
concepts to represent itself graphically. Although we have discussed them earlier, we
revisit them here once again:

Entity: Any real-world object that has certain properties (attributes of its own) and
this object are uniquely identified by the system on the basis of these. This is
represented by a rectangle with the entity name specified in the centre.
For e.g.: student is an entity.
Attribute: Attribute is the properties of an entity, like a student entity can have
attribute as student name, student roll no., student class etc. Attributes are placed
5
inside the circles and attached to the entities and relationships.
Relationship: Relationship specifies the meaningful relation between two entities.
This relationship can also have attributes. A rhombus represents these with a relation
specified in it. For e.g.: if we have student and course as entities, then we can relate
these entities as student enrols for a course.

Student
Name

STUDENT COURSE
Enrols

Entity Course
Entity
Code
Student
Number Relationship
Course
E Name

Attributes

Degree of Relationship (DOR): This specifies the occurrence of entity with other
entity.

One to One (1:1): In this, there can be almost one related occurrence for each
entity. For example, A single manager manages one department and one department
can be managed by a single manager. It is represented as follows.

Manager MANAGES Department

One to Many (1:N): Here, for one occurrence of the first entity, there may exist
many occurrences of the second entity and for every occurrence of the second entity,
these exists only one occurrence of the first entity e.g.:

Manager SUPERVISE Employees

1 N

Here one manager supervises many employees and every employee reports to only
one manager.

Many to Many (M: N): In this degree of relationship, for one occurrence of the
first entity, these may exists many occurrences of the second entity and also for
every occurrences of second entity, there exists many occurrences of the first entity
e.g.:

Employee WORKS Project

FOR
M N
6
One employee can work for many projects and many employees can handle one
project.

Normalization is another concept in data modelling. Normalization is a process of

converting complex data into simpler form without any loss of information. The
Normalization technique ensures that there is no dependent and duplicate data when
the E-R model has been made. Normalization first of all, converts the data into tables
or relations. These tables are checked for redundancy. Finally the form is converted
to a database definition. Why do we need normalization? Normalization improves the
database design. Whenever the design is modified, we need to re-organize the data.
Normalization reduces the need of reorganizing the data. Process of normalization
removes all undesirable consequences that may occur due to inserting, updating and
deleting values from the tables. Normalization reduces the unnecessary repetition of
data (redundancy) that causes the problem with storage and retrieval of data. Poorly
designed databases have several data management difficulties e.g.

Consider a relation

LIBRARY (MNAME, MADD, B_TITLE, ISS_DATE, DUE_DATE)

This relation has the following problems:

1) Here duplicate data exists because member address will be repeated if a
member issues more than one book.
2) Insertion Problems/ Anomalies: If a member does not issues a book then
we cannot record the address of a member. Here MNAME & B_TITLE are
both necessary and hence we cannot leave any one of them as blank.
3) Updating Problem: If a member has issued two or more books, then address
is necessary in all and if a member’s address needs to be updated, then all the
records needs to be updated.
4) Delete Anomalies: Here if we delete the issue details, then address would not
be there.
But all the above problems can be eliminated by normalization. If this single relation is
broken down in two relations:

MEMBER_DETAILS (MNAME, MADDR)

MEMBER_TRANS (MNAME, B_TITLE, ISS_DATE, DUE_DATE)

But this requires a join between these two relations, which is very expensive.
Now lets look into several normal forms with the help of an example:

Table 16.1: Unnormalized Data

Roll No Name Subject Marks

1 Amit English 65

Hindi 72

Maths 70

2 Seema English 70

3 Anjali English 54

Hindi 60
7
To make this unnormalized data into 1 NF (First Normal Form), we have to make
each cell containing one value. And all the repeated information should be removed.

Table 16.2: First Normal Form

Roll No. Name Subject Marks

1 Amit English 65

1 Amit Hindi 72

1 Amit Maths 70

2 Seema English 70

3 Anjali English 54

3 Anjali Hindi 60

The data is still redundant in this form. Here combination of two keys (composite
key), Roll No. and Subject, is a primary key (PK, that uniquely identifies a record).
But the attributes of this table depend on the part of the PK. Roll No. and subject
determines marks, Roll No. determines Name, Name has no dependency on the
attribute subject. This may lead to following problems:

Insertion: the name of a subject cannot be recorded until a student gives any exam.

Updation: Roll No. and name is repeated several times. If name of the student is to
be changed, then at every place the name needs to be updated otherwise may lead to
inconsistencies.

Deletion: if a student has not given any of the three exams, then the name of that
particular student will be deleted.

So, for overcoming these problems, this first normal form needs to be decomposed
and converted into Second Normal Form (2NF) without any loss of information.

Table 16.3: Relation/Table in 2NF

Roll No. Name Roll No. Name Subject Marks

1 Amit 1 Amit English 65

2 Seema 1 Amit Hindi 72

3 Anjali 1 Amit Maths 70

2 Seema English 70

3 Anjali English 54

3 Anjali Hindi 60

A relation is said to be in 2NF, only if it is in 1NF and every attribute is dependent on

the whole key and not just a part of it.

8
Other major normal forms are 3NF and 4NF. Third normal form or 3NF is used to
prevent loss of information and dependencies preserving decomposition. Fourth
normal form or 4NF is used to preserve multi-valued dependency, which is essentially
a constraint. There are several other normal forms like project-join NF, domain-key
NF. We are not describing them as it is not within the scope of this course.

Activity A

Prepare a comparative chart of the strengths and weaknesses of two competing

DBMS product in the market e.g. dBase and Oracle.

..............................................................................................................................

16.7 DATA TYPES

In database system, for storing the data, each column in the table have a certain type
of data. For example when we create a table for employee’s personal data, then we
may have different fields like name, address, phone, age etc. In this if we take the
field “name” then this would of character type and “age” and “phone” are of numeric
type.

Sometimes an attribute of a table T takes the values from a set D that is known as a
domain. A domain is defined in the cases when we want an attribute to take some
exact set of constants. For instance, the domain of the attribute age for a particular
post that a candidate can apply for, might be defined as consisting of all the integer
numbers between 18 and 25. On the other hand, the domain of the marks column,
might be defined as all the numbers between 0 and 100, with at most one non-zero
digit after the decimal point (assuming the maximum marks to be 100). The
significance of declaring a column of a table to have a particular type (or domain) is
the ability to compare the values of two different column rests on this declaration. A
particular column I a table must contain similar data, which is of a particular type.
Besides storing character, numeric, we can also store data, binary data such as
graphics, sound also. Whenever we have the bio data of employees or students or
candidates, sometimes it is nice to store their photographs also, in that cases, we can
use graphics as a data type for photograph column.

16.8 DEVELOPMENTS IN DATABASE

TECHNOLOGY

DBMS consists of a collection of interrelated data that is called a database and a

collection of programs to manage and access the data. An RDBMS is a collection of
tables, each of which is assigned a unique name. Each table consists of a set of fields
and stores a large set of records. A data warehouse is a repository of information
collected from multiple sources, stored under a unified schema that resides at a single
site. There have been a lot of developments in the field of database technology.

9
These developments include handling of spatial data such as maps; engineering
design data such as design of buildings, components and circuits; multimedia data
such as text, image, video and audio data; time related data such as historical records
or stock exchange data and the World Wide Web data. Han & Kamber (2001) had
described each of these advanced databases:
1. Object Oriented Databases: In object oriented databases each entity is
considered as an object. These objects can be customers, suppliers, employees
or items. Objects that share a common set of properties can be grouped into a
class that represents properties common to a class.
2. Object Relational Databases: In object relational data model much is the
same as the basic relational data model but for the fact that object relational
databases also handles complex data types and complex object structures.
3. Spatial Databases: These databases contain geographic databases, clip design
databases, medical and satellite image databases. These data are represented in
raster format, consisting of n-dimensional bit maps or pixel maps as well as
vector format, consisting of basic geometric shapes such as points, lines and
polygon etc.
4. Time Series & Temporal Database: These databases contain time-related
data. A temporal database usually stores relational data that include time-
related attributes. A time series database stores sequences of values that
change with time.
5. Text & Multimedia Databases: Text databases contain word description for
objects (these could be long sentences or paragraphs). Multimedia databases
store images, audio and video data. These databases are used in applications
such as picture content-based retrieval, voice mail systems, video-on-demand
systems & World Wide Web etc.
6. Heterogeneous Databases: Objects in one component database may differ
greatly from objects in other component databases, making it difficult to
assimilate their semantics into the overall heterogeneous database. There are
special methods for analysis of such databases.
7. World Wide Web Databases: World Wide Web has data objects linked
together to facilitate interactive access. Users seeking information of interest
traverse from one object via links to another.

Activity B
Now that you know about various types of data, you can encounter in day-to-day life.
Take the case of an organization of your choice and try to identify two examples of
each of these data types. Also, comment on the usefulness of analyzing these data
types for the organization

..............................................................................................................................

..............................................................................................................................
10
16.9 DATABASE ADMINISTRATOR AND
THE ROLE

Large and complex databases need a lot of maintenance to work in a proper manner.
A database administrator (DBA) does this maintenance. DBA is the supervisor of
the database and hence have the highest level of expertise. DBA centrally controls
the database and administers the overall user community. DBA also takes care of the
data and controls the database structures. DBA is responsible for accessing the
database so that an unauthorized person should not access the database. DBA stores
the permissions granted to the users created to verify that a particular user can only
perform a given operation on the database. DBA can also revoke the permission if he
founds that the user or user group needs no more access to that particular portion of
the database.

DBA account is sometimes known as the system account that has the powerful
capabilities that other regular database users don’t have. Sometimes when more than
one user uses the same resource such as the data, there may exists the conflict but
the DBA seeks for the compromise and takes care of the conflict for the benefit of
the organization. Hence, DBA also has the responsibility for maintaining the integrity
of data. This means that only accurate data can be inserted into the database.

Duties of DBA includes the existence control, definition control, quality control,
update control, access control etc. The DBA is also responsible for recovering the
database from failures that may be due to human disasters, software and hardware
causes or natural causes with the minimal loss of data. DBA changes the database
according to the changes or growth in the organization. Hence, DBA is said to be a
super user who is responsible for monitoring and improving the performance and
operations to maintain the database activities. The database dictionary is one of the
most important tools for the database administrator. It is used to maintain information
related to various resources.

16.10 CRITICAL SUCCESS FACTOR OF DATA

WARE HOUSING

In 1990, Bill Inmon first introduced the term Data Warehouse. According to him,
“A warehouse is a subject-oriented, integrated, time-variant and non-volatile
collection of data in support of management’s decision-making process’. You will
read in detail about data warehousing in the next unit. A data warehouse is a central
repository for significant pieces of the data that are collected by various business
systems. Data from various online transaction processing applications and other
sources is organized on the data warehouse for use decision-making process.

A data warehouse is used in applications like data mining, Web mining and a decision
support system (DSS). Data Warehouse enables the executive, manager or the
analyst to make better and faster decisions. It presents the right information in the
right place at the right time with the right cost in order to support the right decision.
According to Inmon, a data warehouse should firstly, have a common format meaning
that data that goes into a warehouse should have a common data format. Since a
data warehouse is made out of a combination of various organizational databases of
the company, every care should be taken to maintain uniformity. Secondly, since
different company functions such as Sales, Marketing, Finance, and Production have
some variables common in a database. 11
A data warehouse should be able to use these data pertaining to different functions.
Thirdly, since data often contain time as a dimension and is updated into a data
warehouse periodically, a data warehouse should be efficient in computing all time
dependent aggregations again and again.

Finally since data warehouses are never deleted or updated they should be able to
sustain large chunks of data (may be in terabytes). A data warehouse grows all the
time as new data keeps on adding. In practice, a data warehouse is often
“resynchronized” to keep its volume manageable. Resynchronization means that data
is kept in periods and as and when a new period is added the oldest one is deleted.

These are some very preliminary concepts about data warehousing. You will read
about it in more detail in the next unit.

16.11 SUMMARY

Data consists of facts and details about things, activities, transactions etc. Data can
be stored as a resource that can be drawn later on to produce information for the
people and activities that need it. In this unit we have discussed about the prominent
features of a modern database management system. Understanding a DBMS is very
significant for a manager dealing with information systems. You have learnt about
modelling data and different data types. You saw the developments in the field of
database technology. This shows that almost any kind of data can be handled, be it a
music database or a database of photographs stored on the computer. The unit closes
with giving you a glimpse of success factors in data warehousing, which you would
read in detail in the next unit.

We have limited our scope in the sense that we would not like to make you a
programming expert but would be more interested in making you to capable of
applying these concepts for deriving business advantage.

16.12 UNIT END EXERCISES

1) What do you understand by “data” and “information”?

Give three examples each to distinguish between data and information.

2) Explain the meaning of the terms database, database management system

and database administrator in your own words.

3) Explain what do you understand by database management systems?

Describe its components.

4) What are data models? How you would classify the data models?
Differentiate between various data models with the help of an example.

5) What is normalization and why it is used? Explain with the help of an example
how would you derive normal forms.

6) Discuss different types of data in database system. What are the developments
in database technology with respect to data types?

12
16.13 REFERENCES AND SUGGESTED FURTHER
READINGS

Combs, Martin R (1995), Information Systems for Business Management,

Pitman Publishing, 128, Long Acre, London

Han Jiawei & Kamber Micheline (2001), Data Mining: Concept and Techniques,
Morgan Kaufmann, Elsevier Science, India

Hicks Jr, James O. (1990), Information Systems in Business: An Introduction,

Second Edition, West Publishing Company, St. Paul, MN

http://whatis.techtarget.com & http://searchdatabase.techtarget.com/

for definitions of terms. Site accessed on 19/05/2004.

Kroth Henry F, Silberschatz A(2001), Database System Concepts,

McGraw Hill International Edition.

Sadgopan S. (1997), Management Information Systems,

Prentice-Hall of India Private Limited, New Delhi, India

13
UNIT 17 DATA WAREHOUSING AND
DATA MINING
Structure
17.1 Introduction
17.2 Objectives
17.3 Operational and Informational Databases
17.4 The Data Warehouse
17.5 Data Warehouse Schema
17.6 Metadata
17.7 Data Warehouse and the Web
17.8 On-line Analytical Processing (OLAP)
17.9 Data Visualization
17.10 Data Mining
17.11 Summary
17.12 Unit End Exercises
17.13 References and Suggested Further Readings

17.1 INTRODUCTION
Over the past couple of decades huge investments have been made in computer
systems by businesses of all types to gain competitive advantage. A large majority of
these computer applications designed and developed during this period have
concentrated on automating business processes, for example: order processing,
inventory and itemized billing of telephone calls. The automated business systems, or
the operational systems – as they are called, were not only good at doing what they
were designed for, but also (possibly unintentionally) ended up collecting huge
volumes of data. However, in the context of the twenty first century, competitive
advantage comes less from mere automation (or even optimization) of day-to-day
activities, and more and more from proactive strategic decisions based on analytical
use of data. Unfortunately, the technological requirements of systems for supporting
analytical applications, like on-line analytical processing (OLAP) and data mining,
differ greatly from the requirements laid down when the operational systems were
designed. We will discuss these differences in the next section and then go on to see
how a new breed of systems, known as data warehouses have evolved, matured,
and taken the world of business by storm in recent years.

17.2 OBJECTIVES
After reading this unit you should be able to:
• Identify the types of data in data warehouse;
• Describe the design decisions involved in data warehouse design;
• Explain the importance of building an Enterprise Data Warehouse;
• Depict the architecture of a data warehouse and its various components;
• Describe various aspects of Star and Snowflake schemas;
• Define and explain the concept of metadata in the data warehouse;
• Enumerate the importance of external data feed from the World Wide Web
to the Data Warehouse;
• Describe the process of data analysis and on-line analytical processing;
• Develop a case for the business value of visualization of data; and
• Apply data mining tools for discovery of hidden relationships and patterns in
business data. 1
17.3 OPERATIONAL AND INFORMATIONAL
DATABASES

There are several reasons that have compelled information system designers to
accept that even the latest technology cannot be optimized to support both operational
and informational (or analytical) processing in a cost effective manner.
• The data required is different
• The technology required is different
• The user community is different
• The access pattern is different
• The processing characteristics are different
• The system loading pattern is different.

High level business objectives provide the framework for competitiveness and growth
to an enterprise in the long run. To set realistically achievable objectives and monitor
the company’s performance against them, managers need information on subjects
like customers (e.g. their needs and preferences), products (e.g. the company’s
offering vis-à-vis competitors), suppliers (e.g. their production lead times) and
distributors (e.g. location). It is also beneficial to aggregate measures like quantities
of products and sales values across various dimensions like geographical regions and
time, and compare them with yard-sticks like budgets, forecasts, previous year’s
actuals and industry averages. The differences between informational systems
satisfying needs of these types and traditional operational systems are summarized in
the Table 17.1.

Table 17.1: Operational and Decision Support Data

PRIMITIVE DATA / OPERATIONAL DATA DERIVED DATA / DSS DATA

• application oriented • subject oriented
• detailed • summarized , otherwise refined
• accurate, as of the moment of access • represents values over time, snapshots
• serves the clerical community • serves the managerial community
• can be updated • is not updated
• run repetitively • run heuristically
• requirements for processing • requirements for processing not
understood a priori understood a priori
• compatible with the SDLC • completely different life cycle
• performance sensitive • performance relaxed
• accesses a unit at a time • accessed a set at a time
• transaction driven • analysis driven
• control of update a major concern in terms of • control of update no issue
ownership
• high availability • relaxed availability
• managed in its entirety • managed by subsets
• nonredundancy • redundancy is a fact of life
• static structure; variable contents • flexible structure
• small amount of data used in a process • large amount of data used in a process
• supports day-to-day operations • supports managerial needs
• high probability of access • low, modest probability of access

2
Information systems have evolved from the master-file / transaction file and
sequential processing of the 1960s to DBMS based random access processing of the
1970s to high-performance transaction processing during the 80s to decision support
systems built around the existing operational databases. The traditional IT
departments when faced with the need to provide strategic information using data in
operational databases find themselves inadequately equipped to respond.
Some of the difficulties faced are:
• IT receives too many ad hoc requests, resulting in a large overload. With limited
resources, IT is unable to respond to the numerous requests in a timely fashion.
• Requests are not only too numerous, they also keep changing all the time.
The users need more reports to expand and understand the earlier reports.
• The users find that they get into the spiral of asking for more and more
supplementary reports, so they sometimes adapt by asking for every possible
combination, which only increases the IT load even further.
• The users have to depend on IT to provide the information. They are not
able to access the information themselves interactively.
• The information environment ideally suited for strategic decision-making has to
be very flexible and conducive for analysis .IT has been unable to provide such
an environment.
The solution to the problems lies in a new paradigm – the data warehouse. It is an
environment that is specifically designed to hold data required to support complex
analysis, and detection of patterns, trends and deviations.
The characteristics of such an environment can be summarized as follows:
• Provides an integrated and total view of the enterprise
• Make the enterprise’s current and historical information easily available for
decision-making.
• Makes decision-support transactions possible without hindering operational
systems
• Renders the organization’s information consistent.
• Presents a flexible and interactive source of strategic information.

17.4 THE DATA WAREHOUSE

We have seen in the previous section that we need a new breed of information
delivery environment, called a data warehouse, to facilitate strategic decision-making.
The concept of a data warehouse given by Bill Inmon, the father of data
warehousing, is depicted in Figure 17.1.

A Data Warehouse is a:

• Subject-oriented
• Integrated
Data • Time-Variant
Warehouse • Monvolatile

Collection of Data in Support of

Management’s Decision

Fig. 17.1: What is a Data Warehouse? 3

The defining characteristics of a data warehouse are:
• Subject-orientation: Data warehouse data are arranged and optimized to
provide answers to questions coming from diverse functional area within a
company. Therefore, the data warehouse contains data organized and
summarized by topic, such as sales, marketing, finance, distribution, and
transportation. For each one of these topics the data warehouse contains
specific subjects of interest - products, customers, departments, regions,
promotions, and so on. Note that this form of data organization is quite different
from the more functional or process-oriented organization of typical transaction
systems.
• Time-variancy: We have already noted that the DSS data include a time
element (see Table 17.1). In contrast to the operational data, which focus on
current transactions, the warehouse data represent the flow of data through
time. The data warehouse can even contain projected data generated through
statistical and other models.
• Non-volatility: Once data enter the data warehouse they are never removed.
Because the data in the data warehouse represent the company’s entire history,
the operational data representing the near-tern history, are always added to it.
Because data are never deleted and new data are always added, the data
warehouse is always growing. That is why the DSS DBMS must be able to
support multi-gigabyte and even multi-terabyte database and multiprocessor
hardware.
• Integration: The data warehouse is a centralized, consolidated database that
integrates data derived from the entire organization. Thus the data warehouse
consolidates data from multiple and diverse sources with diverse formats. Data
integration implies a well-organized effort to define and standardize all data
elements. This integration effort can be time-consuming but, once
accomplished, it provides a unified view of the overall organizational situation.
Data integration enhances decision-making and helps managers to better
understand the company’s operations. This understanding can be translated into
recognition of strategic business opportunities.
Table 17.2 summarizes the differences between the data in a data warehouse and
that in an operational database.
Table 17.2: Operational Data and Data Warehouse Data

CHARCTERISTIC OPERATIONAL DATABASE DATA DATA WAREHOUSE DATA

Similar data can have different representations or Provide a unified view of all data elements
Integrated meanings. For example, telephone numbers may with a common definition and
be stored as 033-29-70701 or as 0332970701, and representation for all business units.
a given condition may be labeled as T/F or 0/1 or
Y/N. A sales value may be shown in thousands
or in millions.
Subject-oriented Data are stored with a functional, or Data are stored with a subject orientation
process, orientation. For example, data that facilities, multiple views of the data and
may be stored for invoices, payments, facilitates decision making .For example,
credit amounts, and so on. sales may be recorded by product, by
division, by manager, or by region.

Data are recorded as current transactions. For Data are recorded with a historical
Time-variant example, the sales data may be the sale of a perspective in mind. Therefore, a time
product on a given date, such as Rs. 342.78 on dimension is added to facilitate data
12-AUG-1999. analysis and various time comparisons.

Data updates are frequent and common. For Data cannot be changed. Data are only
example, an inventory amount changes with added periodically from historical systems.
Non-volatile each sale. Therefore, the data environment is Once the data are properly stored, no
fluid. changes are allowed. Therefore the data
4 environment is relatively static.
DATA INFORMATION DECISION

L Q
o u
Operational a e
Data d r
Data
y
Summary Miners
M
a Information M
n Detailed a
a Detailed
Information n
g Information a
e Meta g
External
r Data e
Data
r OLAP
Tools

WAREHOUSE MANAGER

Fig. 17.2: Data Warehouse Architecture

The Load Manager

Data flows into the data warehouse through the load manager. The data is mostly
extracted from the operational database(s) and other internal sources (like archived
historical data), and supplemented by data imported from external sources. Externally
sourced data can greatly enhance the value of information generated from a data
warehouse. For example Transco, the gas pipeline operator in UK, uses weather
forecast data from the British Met Office on a regular basis to determine demand for
gas (the main source of energy used for heating homes and offices) in various areas
of the country. The weather data is fed into a model that incorporates several other
factors (e.g. day of the week, internal data about customers’ usage patterns,
demographic and economic profile data, alternate sources of energy, types of
buildings in the area) to arrive at a demand forecast. Types of data from external
sources that may be included in data warehouse are: financial indicators and statistics
of the industry, market share data of competitors, demographic data, weather data,
credit worthiness data, readership / viewer survey data for advertising media,
specially commissioned surveys and so on. External data is usually obtained from
commercial database services or government agencies (e.g. Equifax, Reuters, Met
Office, census agency, industry associations, stock exchanges, local government
statistics service). The data from such diverse sources will obviously be in different
incompatible formats and will be distributed through various media. Some of them
may be available on a downloadable format on the Internet; others may be distributed
on CD-ROMs, while some may only be available on printed media. Some data may
be available for free but most data (particularly when used for commercial purposes)
have to be purchased.

The load manager primarily performs what is termed an extract-transform-load

(ETL) operation.
• Data Extraction
• Data Transformation
• Data Loading

5
Data Extraction: This function has to deal with numerous data sources. Appropriate
techniques have to be employed for each data source. Source data may be from
different source machines in diverse data formats. Part of the source data may be in
relational database systems. Some data may be on other legacy network and
hierarchical data models. Many data sources may still be in flat files. There may also
be the need to include data from spreadsheets and local departmental data sets. Data
extraction can become quite a complex operation at times.

Various tools are available on the market for data extraction. Use of outside tools
may be considered suitable for certain data sources. For the other data sources, in-
house programs may need to be developed to do the data extraction. Purchasing
outside tools may entail high initial costs. In-house programs, on the other hand, may
mean ongoing costs for development and maintenance.

After extraction, the data needs to be kept somewhere for further preparation.
Sometimes the extraction function is performed in the legacy platform itself if that
approach suits the designed framework. More frequently, data warehouse
implementation teams extract the source data into a separate physical environment
from which moving the data into the data warehouse would be easier. In the separate
environment, the source data may be extracted into a group of flat files, or an
intermediate relational database, or a combination of both. This physical environment
is called the data-staging area.

Data Transformation: In every system implementation, data conversion is an

important function. For example, when implementing an operational system such as a
magazine subscription application, the database has to be initially populated with data
from the existing system records. The conversion may either be from a manual
system or from a file-oriented system to a modern system supported with relational
database tables. In either case, the data will need to be converted from the existing
systems. So, what is so different for a data warehouse? Why is data transformation
for a data warehouse more involved than that for an operational system?

As already discussed, data for a data warehouse comes from many disparate
sources. If data extraction for a data warehouse poses great challenges, data
transformation presents even greater challenges. Another factor in the data
warehouse is that the data feed is not just an initial one-time load. The ongoing
changes will have to continue to be picked up from the source systems. Any
transformation tasks are set up for the initial load will have to be adapted for the
ongoing revisions as well.

A number of individual tasks are performed as part of data transformation. First, the
data extracted from each source is cleaned. Cleaning may be correction of
misspellings, or may include resolutions of conflicts between state codes and pin
codes in the source data, or may deal with providing default values for missing data
elements, or elimination of duplicates when the same data is brought in from multiple
source systems.

Standardization of data elements forms a large part of data transformation. The data
types and field lengths for same data elements retrieved from the various sources
need to be standardized. Semantic standardization is another major task. Synonyms
and homonyms have to be resolved. Resolution of synonyms is required when two or
more terms from different source systems mean the same thing. On the other hand,
when a single term means many different things in different source systems,
resolution of homonyms have to be performed.

6
Data transformation involves many forms of combining pieces of data from the
different sources. In some cases, data from a single source record or related data
elements from many source records are combined. In other situations, data
transformation may also involve purging source data that is not useful and/or
separating out source records into new combinations. During data
transformation sorting and merging of data takes place on a large scale in the data
staging area.

In many cases, the keys chosen for the operational systems are field values with
built-in meanings. For example, the product key value may be a combination of
characters indicating the product category, the code of the warehouse where the
product is stored, and some code to show the production batch. Primary keys in the
data warehouse cannot have built-in meanings. Therefore, data transformation also
includes the assignment of surrogate keys derived from the source system primary
keys.

A grocery chain point-of-sale operational system keeps the unit sales and revenue
amounts by individual transactions at the checkout counter at each store. But in the
data warehouse, it may not be necessary to keep the data at this detailed level. It
may be more appropriate to summarize the totals by product at each store for a given
day and keep the summary totals of the sale units and revenue in the data
warehouse’s storage. In such cases, the data transformation function would include
such summarization processing.

The end result of the data transformation function is a collection of integrated data
that is cleaned, standardized, and summarized. Now the data is ready to be loaded
into each data set in the data warehouse.

Data Loading: Two distinct groups of tasks form the data loading function. After
completion of the design and construction of the data warehouse, when it goes live
for the first time, the initial loading of data is done. The initial load moves large
volumes of data and takes substantial amount of time, but it is a one-time effort. As
the data warehouse starts functioning, extraction of additions (and changes) to the
source data continues on an ongoing basis, together with the transformation and
loading operations.

The Query Manager

The query manager provides an interface between the data warehouse and its
users. It performs tasks like directing the queries to the appropriate tables, generating
views on an ad-hoc basis if required, monitoring the effectiveness of indexes and
summary data, and query scheduling.

Data Warehouse Design Considerations

The key considerations involved in the design of a data warehouse are:

• Time Span
• Granularity
• Dimensionality
• Aggregations
• Partitioning

7
• Time span: Operational data represent current (atomic) transactions. Such
transactions might define a purchase order, a sales invoice, an inventory
movement, and so on. In short, operational data cover a short time frame. In
contrast, data warehouse data tend to cover a longer time frame. Managers are
seldom interested in a specific sales invoice to customer X; rather they tend to
focus on sales generated during the last month, the last year, or the last five
years. Rather than concern themselves with a single customer purchase, they
might be interested in the buying pattern of such a customer or groups of
customers. In short, data warehouse data tend to be historic in nature. That is,
the data warehouse data represent company transactions up to a given point in
time, yesterday, last week, last month, and the like. The time period for which
data is held in the data warehouse is determined by the data analysis
requirements of the users of the data warehouse. These needs, in turn, arise
from the changes in the business environment that a particular organization needs
to monitor, in its effort to stay ahead of its competitors. Since, a data
warehouse’s size depends on the span of time for which data is stored, the time
span covered by the data warehouse is an important design consideration. If, for
example, the environment changes rapidly, the data required for analysis would
relate more often to the recent past, rather than that over several years or
decades. In that case the designers of the data warehouse need to consider
whether or not the cost incurred in holding data for indefinitely long time spans
would be worthwhile.

• Granularity: According to Inmon, the single most important design aspect of a

data warehouse is the decision on granularity. It refers to the level of detail or
summarization available in units of data in the data warehouse. The more detail
there is, the lower the level of granularity. The less detail there is, the higher the
level of granularity.

Operational data represent specific transactions that occur at a given time, such as
customer purchase of product X in store A. Thus, granularity is taken for granted to
be of the lowest level, in operational systems. Data warehouse data must be
presented at different levels of aggregation, from highly summarized to near atomic.
This requirement is based on the fact that managers at different levels in the
organization require data with different levels of aggregation. It is also possible that a
single problem requires data with different summarization levels. For example, if a
manager must analyze sales by region, (s)he must be able to access data showing the
sales by region, by city within the region, by store within the city within the region,
and so on. In this case, the manager requires summarized data to compare the
regions, but (s)he also needs data in a structure that enables him or her to decompose
(drill down) the data into more atomic components (that is, data at lower levels of
aggregation). For example, it is necessary to be able to drill down to the stores within
the region in order to compare store performance by region. Granularity level in a
data warehouse cannot, therefore, be assumed.

The decision on granularity level profoundly affects both the volume of data that
resides in the data warehouse, and the type of query that can be answered. A trade
off exists between the volume of data in the data warehouse and the level of detail of
queries (see Figure 17.3 below). Some data warehouses are designed to support
dual granularity. In such environments some data (usually the most recent) is held
at a relatively low level of granularity, while the rest is held in more summarized form
(i.e. at a higher granularity level). This enables detailed analysis at the same time
allows reduction of data volume.

8
Fig. 17.3: Granularity of Data Warehouse Data

Fig. 17.4: Dimensionality of Data Warehouse Data 9

• Dimensionality: This is probably the most distinguishing characteristic of a
data warehouse. From the data analyst’s point of view, the data is always
related in many different ways. For example, when we analyze product sales
by a customer during a given time span, we are likely to ask how many widgets
of type X were sold to customer Y during the last six months. In fact, the
question tends to expand quickly to include many different data dimensions.
For instance, we might want know how the product X fared relative to product
Z during the past six months, by region, state, city, store, and customer (or sales
of various products by quarters by country, as shown in Figure 17.4 ). In this
case, both place and time are part of the picture. In general, data analysis tends
to include many data dimensions, producing a multidimensional view of the data.
The data model used for modeling data warehouses is known as the dimensional
model. The numerical measurements related to the business (like sales volumes) are
stored in fact tables. The descriptions of the dimensions are stored in dimension
tables. We will discuss this in more detail in later sections. The number and types of
dimensions and facts that are to be stored in a data warehouse is a very important
design decision, and (much like the decision on granularity) affects both the data
volume and the types of analysis that can be supported.
• Aggregations: We have seen how data analysis queries directed at data
warehouses involve dimensions. Another very common type of query directed at
data warehouses involves sums of values along the different dimensions. For
example: what is the total sales volume of VCR during the past 4 quarters?
Answering this query using the fact and dimension tables would involve summing
up the individual sales volume figures over the 4 quarters and the 3 counties. In
real situations, similar queries might involve retrieving and summing hundreds or
thousands of individual values. To avoid excessive processing load on the data
warehouse arising from frequently asked queries of this type, it is often decided,
at design time, to store some pre-calculated aggregations, along with the base
facts, in the data warehouse (as illustrated in Figure 17.4 above). This decision
affects the data volume and performance of certain types of queries.
• Partitioning: One of the essences of the data warehouse is flexible data storage,
management, and access. When data resides in large physical units, among other
things it cannot be:
• indexed easily
• sequentially scanned, if needed
• restructured easily
• backed up conveniently
• recovered easily
• monitored easily
In short, having a big mass of data defeats much of the purpose of the data
warehouse. The purpose of partitioning is to break the data into smaller (more
manageable) physical units of storage. The criteria used for dividing the data can be:
date, line of business / product category, geography / location, organizational /
administrative unit, or any combination of these.

Activity A
What is the difference between a database and a data warehouse? Take some
database from any organization and try to convert it into a data warehouse. What are
the visible advantages that you can make out?
..............................................................................................................................

..............................................................................................................................

..............................................................................................................................
10
17.5 DATA WAREHOUSE SCHEMA

One of the key questions to be answered by the database designer is: How can we
design a database that allows unknown queries to be performant? This question
encapsulates the differences between designing for a data warehouse and designing
for an operational system. In a data warehouse one designs to support the business
process rather than specific query requirements. In order to achieve this, the
designer must understand the way in which the information within the data
warehouse will be used.

In general, the queries directed at a data warehouse tend to ask questions about
some essential fact, analyzed in different ways. For example reporting on:
• The average number of light bulbs sold per store over the past month
• The top ten most viewed cable-TV programs during the past week
• Top spending customers over the past quarter
• Customers with average credit card balances more than Rs.10,000 during the
past year.
Each of these queries has one thing in common: they are all based on factual data.
The content and presentation of the results may differ between examples, but the
factual and transactional nature of the underlying data is the same.

Table 17.3: Fact Tables and Attributes

Requirement Fact Attributes

Sales of Light Bulbs EPOS Transaction Quanity Sold

Product Identifier (SKU)
Store Identifier
Data and Time
Revenue Achieved

Cable Programs Cable Pay-per-view Customer Identifier

Transaction Cable Channel Watched
Program Watched
Data and Time
Duration
Household Identifier

Customer Spend Loyalty Card Customer Identifier

Transaction Store Identifier
Transaction Value
Date and Time

Customer Account Account Transactions Customer Identifier

Account Number
Type of Transaction
Destination Account Number

Fact data possesses some characteristics that allow the underlying information in the
database to be structured. Facts are transactions that have occurred at some point in
the past, and are unlikely to change in the future. Facts can be analyzed in different
ways by cross-referencing the facts with different reference information.
11
For example, we can look at sales by store, sales by region, or sales by product. In a
data warehouse facts also tend to have few attributes, because there are no
operational data overheads. For each of the examples described, the attributes of the
fact could be as listed in Table 17.3 above.

One of the major technical challenges within the design of a data warehouse is to
structure a solution that will be effective for a reasonable period of time (at least
three to five years). This implies that the data should not have to be restructured
when the business changes or the query profiles change. This is an important point,
because in more traditional applications it is not uncommon to restructure the
underlying data in order to address query performance issues.

12345678901234567890123
12345678901234567890123
12345678901234567890123
12345678901234567890123
Facts 12345678901234567890123
DIMENSIONS
12345678901234567890123
12345678901234567890123

Customer
Events

1234567890123 123456789012345678
123456789012345678 1234567890123 123456789012345678
123456789012345678 1234567890123 123456789012345678
123456789012345678
123456789012345678 1234567890123
1234567890123 123456789012345678
123456789012345678
Customer
123456789012345678
123456789012345678
Time
1234567890123
1234567890123
Location
123456789012345678
123456789012345678
123456789012345678 1234567890123 123456789012345678

Fig. 17.5: Star Schema

The inherent advantage of factual transactions is that their content is unlikely to

change, regardless of how it is analyzed. Also, the majority of the data volume of a
data warehouse comes from the factual information. It is therefore possible to treat
fact data as read-only data, and the reference data (used to interpret the fact data) as
data that is liable to change over time. Thus, if reference data needs to change, the
voluminous fact data would not have to be changed or restructured.

Star schemas (so called due to their ‘star like’ appearance) are physical database
structures that store the factual data in the ‘center’, surrounded by the reference
(or dimension) data (see Figure 17.5 above).

The dimension tables should be relatively small (typically less than 5 GB in total) in
comparison to the size of the data warehouse, so that restructuring costs are small as
long as the keys to the fact tables are not changed. In star schema arrangements, the
reference information is often denormalized to a single table to speed up query
performance. The redundancy overheads are acceptable, as the sizes involved are
small and even the reference information changes infrequently.

The dimensional information, represented by the reference data is often organized in

form of concept hierarchies that are used for analysis, and designing data
warehouse aggregations.

12
A typical concept hierarchy for a retail chain is depicted in Figure 17.6 below.

Price PRODUCT
Name, Color, Style, Size

Store
Section

Region Department

Business Unit

Fig. 17.6: Concept Hierarchies

The number of concept hierarchies that can be defined on any given dimension is by
no means restricted to one. There may be several arbitrary concept hierarchies in use
in any organization to enable data analysis from various angles. Figure 17.7 below
shows how the ‘time’ dimension in a retail data warehouse (represented by the day /
date reference data) may be organized into several concept hierarchies or groupings
(which are single level concept hierarchies – ‘Easter’ and ‘Summer’ in Figure 17.7)

DAY/DATE

Week Easter Summer

Six-week
period

Month

Year

Fig. 17.7: Multiple Hierarchies 13

When the concept hierarchies and groupings are incorporated into a star schema
diagram (like Figure 17.8 below), the appearance resembles a ‘snowflake’. Hence,
schemas of this type are called Snowflake schemas.

123456789
123456789 12345678901234567890123456789
12345678901234567890123456789
123456789
123456789
12345678901234567890123456789
12345678901234567890123456789
Snowflake 12345678901234567890123456789
123456789
Facts
123456789
12345678901234567890123456789
Star Dimensions
12345678901234567890123456789
12345678901234567890123456789
Dimensions 12345678901234567890123456789

Dept Line
1234567890123456789
1234567890123456789
1234567890123456789
1234567890123456789
1234567890123456789
1234567890123
1234567890123
Locations
1234567890123456789
1234567890123456789 1234567890123 Products Style
1234567890123456789
1234567890123456789 1234567890123
1234567890123
Sales
1234567890123
1234567890123
1234567890123
Transaction 123456789012345678
123456789012345678
123456789012345678
1234567890123 123456789012345678
Locations 1234567890123 123456789012345678
123456789012345678
Products
123456789012345678 Color
123456789012345678
123456789012345678

1234567890123
1234567890123
1234567890123
Region 1234567890123 Size
1234567890123
Time
Time 1234567890123
1234567890123
1234567890123

Week Summer Easter

Sales Sales

Month

Fi. 17.8: Snowflake Schema

17.6 METADATA

Metadata in a data warehouse is similar to the data dictionary in the context of a

database. It stores data about data in the data warehouse.

Types of Metadata

Metadata in a data warehouse fall into three major categories:

• Operational Metadata
• Extraction and Transformation Metadata
• End-User Metadata

Operational Metadata: As already discussed, data for the data warehouse comes
from several operational systems of the enterprise. These source systems contain
different data structures. The data elements selected for the data warehouse have
various field lengths and data types. Selecting data from different source files, and
loading it into the data warehouse, requires splitting of records, combining parts of
records from different source files, and dealing with multiple coding schemes and
field lengths. When information is delivered to the end-users, it is essential to be able
relate back to the original source data sets. Operational metadata contain all of this
information about the operational data sources that allow us to trace back to the
original source.

14
Extraction and Transformation Metadata: Extraction and transformation
metadata contain data about the extraction of data from the source systems, namely,
the extraction frequencies, extraction methods, and business rules for the data
extraction. Also, this category of metadata contains information about all the data
transformations that take place in the data staging area.

End-User Metadata. The end-user metadata is the navigational map of the data
warehouse. It enables the end-users to find information from the data warehouse.
The end-user metadata allows the end-users to use their own business terminology
and look for information in those ways in which they normally think of the business.

Special Significance

Why is metadata especially important in a data warehouse?

• First, it acts as the glue that connects all parts of the data warehouse.
• Next, it provides information about the contents and structure to the developers.
• Finally, it opens the door to the end-users and makes the contents recognizable in
their own terms.
Metadata Requirements

According to Inmon, a new user approaching a data warehouse wants to know

• What tables, attributes, and keys does the data warehouse contain?
• From where did each set of data come?
• What transformation logic was applied in loading the data?
• How has the data changed over time?
• What aliases exist, and how are they related to each other?
• What are the cross-references between technical and business terms?
(For instance, the field name XVT-351J presumably meant something to a
COBOL programmer in 1965, but what does it mean to me today?)
• How often does the data get reloaded?
• How much data is there? This helps end-users to avoid submitting unrealistic
queries. Given some means of determining the size of tables, staff can tell the
end users, “You can do what you like with 15,000 rows, but if it turns out be
15 million rows, back off and ask for help!”
Metadata requirements of various classes of users are summarized in Table 17.4
below:
Table 17.4: Uses of Metadata

IT Professionals Power Users Casual Users

Database Tables, Columns, Databases, Tables, Columns List of Predefined Queries and
Analysis Reports, Business views.
Server Platforms.
and Discovery

Data structures, Data Business Terms, Data Business Terms, Data

Meaning Definitions, Data Mapping, Definitions, Data Mapping, Definitions, Filters, Data
of Data Cleansing Functions, Cleansing Functions, Sources, Conversion, Data
Transformation Rules Transformation Rules Owners

Program Code in SQL, 3GL, Query Toolsets, Database Authorization Requests,

Information 4GL, Front-end Applications, Access for Complex Information Retrieval into
Access Security Analysis Desktop Applications such as
Spreadsheets.
15
Metadata Components

Warehouse metadata is not very different in kind from ordinary database metadata,
although it is versioned in order to permit historical analysis. Prism gives the following
breakdown of warehouse metadata in its Tech Topic, “Metadata in the Data
Warehouse:”

Mapping

The mapping information records how data from operational sources is transformed
on its way into the warehouse. Typical contents are:
• Identification of source fields
• Simple attribute-to-attribute mapping
• Attribute conversions
• Physical characteristic conversions
• Encoding/reference table conversions
• Naming changes
• Key changes
• Defaults
• Logic to choose from among multiple sources
• Algorithmic changes

Extract History

Whenever historical information is analyzed, meticulous update records have to be

kept. The metadata history is a good place to start any time-based report, because
the analyst has to know when the rules changed in order to apply the right rules to the
right data. If, for example, sales territories were remapped in 1991, results from
before that date may not be directly comparable with more recent results.

Miscellaneous

• Aliases can make the warehouses much more use-friendly by allowing a table
to be queried by “Widgets produced by each factory” rather than “MF-
STATS.” Aliases also come in useful when different departments want to use
their own names to refer to the same underlying data. Obviously, though, aliases
can also cause a great deal of confusion if they are not carefully tracked.

• Often, parts of the same data warehouse may be in different stages of

development. Status information can be used to keep track of this: for instance,
tables might be classified “in-design,” “in-test,” inactive,” or “active.”

• Volumetric information lets users know how much data they are dealing with,
so that they can have some idea how much their queries will cost in terms of
time and computational resources. Volumetrics could usefully include such
information as number of rows, growth rate, usage characteristics, indexing,
and byte specifications.

• It is also useful to publish the criteria and time scales for purging old data.

16
Summarization and Aggregation Algorithms

As discussed above, a typical data warehouse contains lightly and heavily

summarized data, and aggregations as well as full detailed records. The algorithms
for summarizing (and aggregating) the detail data are obviously of interest to anyone
who takes responsibility for interpreting the meaning of the summaries. This metadata
can also save time by making it easier to decide which level of summarization is most
appropriate for a given purpose.

Relationship Artifacts and History

Data warehouses implement relationships in a different way form production

databases. Metadata pertaining to related tables, constraints, and cardinality are
maintained, together with text descriptions and ownership records. This information
and the history of changes to it can be useful to analysts.

Ownership / Stewardship

Operational databases are often owned by particular departments or business groups.

In an enterprise data warehouse, however, all data is stored in a common format and
accessible to all. This makes it necessary to identify the originator of each set of data,
so that inquiries and corrections can be made by the proper group. It is useful to
distinguish between ownership of data in the operational environment and
stewardship in the data warehouse.

Access Patterns

It is desirable to record patterns of access to the warehouse in order to optimize and

tune performance. Less frequently used data can be migrated to cheaper storage
media, and various methods can be used to accelerate access to the data that is most
in demand. Most databases do a good job of hiding such physical details, but
specialized performance analysis tools are usually available. Some general-purpose
tools, such as Information Builders’ SiteAnalyzer, also are available.

Reference Tables / Encoded Data

Reference data is stored in an external table (see discussion on Star Schema above)
and contains commonly used translations of encoded values. The contents of these
tables must be stored in order to guarantee the ability to recover the original un-
encoded data, together with effective from and effective to dates.

Data Model – Design Reference

Building a data warehouse without first constructing a data model is very difficult and
frustrating. When a data model is used, metadata describing the mapping between the
data model and the physical design should be stored. This allows all ambiguities or
uncertainties to be resolved.

From the point of view of the Query Manager (see Figure 17.2 above) of the data
warehouse, the Metadata Repository can be perceived to have three logical
layers: the Information Navigator, the Business Metadata, and the Technical
Metadata.

17
Figure 17.9 below illustrates this concept. The query manager accesses the
metadata through the Information Navigator layer which is the topmost layer of the
metadata repository. The higher layers, in turn, access more detailed metadata
components resident in the lower layers whenever required.

METADATA REPOSITORY
Information Navigator
Navigation routes through warehouse content, Browsing of warehouse tables and attributes,
query composition, report formating, Drill-down and Roll-up Report generation and
distribution, Temporary storage results

Business Metadata
Source, systems, Source-target mappings, data transformation business rules, summary
datasets, warehouse tables and columns in business terminology, query and reporting tools,
predefined queries, preformatted reports, data load and refresh schedules, support contact,
OLAP data, access authorizations.

Technical Metadata
Source systems data models, structures of external data sources, staging area file layouts,
target warehouse data models, source-staging area mapping, staging area-warehouse
mappings, data extraction rules, data transformation rules, data cleansing rules, data
aggregation rules, data loading and data refreshing rules, source system platforms, data
warehouse platform, purge/archival rules, backup/recovery, security.

Fig. 17.9: The Metadata Repository

17.7 DATA WAREHOUSE AND THE WEB

Professor Peter Drucker, the senior guru of management practice, has admonished
IT executives to look outside their enterprises for information. He remarked that the
single biggest challenge is to organize outside data because change occurs from the
outside. He predicted that the obsession with internal data would lead to being
blindsided by external forces.

The majority of data warehousing efforts result in an enterprise focusing inward;

however, the enterprise should be keenly alert to its externalities. As markets become
turbulent, an enterprise must know more about its customers, suppliers, competitors,
government agencies, and many other external factors. The changes that take place
in the external environment, ultimately, get reflected in the internal data (and would be
detected by the various data analysis tools discussed in the later sections), but by then
it may be too late for the enterprise – proactive action is always better than reacting
to external changes after the effects are felt. The conclusion is that the information
from internal systems must be enhanced with external information. The synergism of
the combination creates the greatest business benefits.

18 importance of external data and the challenges faced in integrating external data
The
with internally sourced data was discussed in the Section on Load Manager above. In
the same section, it was mentioned that, some externally sourced data (particularly
time sensitive data), is often distributed through the internet.

Reliability of Web Content

Many question the reliability of web content, as they should. However, few analyze
the reliability issue to any depth. The Web is a global bulletin board on which both the
wise and foolish have equal space. Acquiring content from the Web should not reflect
positively or negatively on its quality.

Consider the following situation: If you hear, “Buy IBM stock because it will double
over the next month,” your reaction should depend on who made that statement and
in what context. Was it a random conversation overheard on the subway, a chat with
a friend over dinner, or a phone call from a trusted financial advisor? The context
should also be considered when judging the reliability of Web content.

Think of Web resources in terms of quality and coverage, as shown in Figure 17.10
below.

Quality

Commercial
Data Bases

Government
Data

Corporate
Data
Doubtful Quality Free Stuff

Coverage

Fig. 17.10: Web-based Information Sources

Toward the top are information resources of high quality (accuracy, currency, and
validity), and resources toward the right have a wide coverage (scope, variety, and
diversity). The interesting aspect of the web is that information resources occupy all
quadrants.
In the upper center, the commercial online database vendors traditionally have
supplied business with high-quality information about numerous topics. However, the
complexity of using these services and the infrequent update cycles have limited their
usefulness.
More to the left, governmental databases have become tremendously useful in recent
years. Public information was often available only by spending many hours of manual
labour at libraries or government offices. Recent developments like the Electronic
Data Gathering, Analysis, and Retrieval (EDGAR) database maintained by the U.S.
Securities and Exchange Commission provide valuable and up-to-date data via the 19
Web.
At the left, corporate Web sites often contain vast amounts of useful information in
white papers, product demos, and press releases, eliminating the necessity to attend
trade exhibits to learn the “latest and greatest” in a market place.
Finally, the “doubtful-quality free” content occupies the lower half of the figure. Its
value is not in the quality of any specific item but in its constantly changing diversity.
Combined with the other Web resources, the doubtful-quality free content acts as a
wide-angle lens to avoid tunnel vision of the market place.

Web Farming
Like operational systems, the Web farming system provides input to the data
warehouse. The result is to disseminate the refined information about specific
business subjects to the enterprise sourced from the Web.
The primary source of content for the Web farming system is the Web because of its
external perspectives on the business of the enterprise. As a content source, the Web
can be supplemented (but not replaced) by the intranet web of the enterprise. This
content is typically in the format of internal Web sites, word processing documents,
spreadsheets, and e-mail messages. However, the content from the intranet is usually
limited to internal information about the enterprise, thus negating an important aspect
of Web farming.
Most information acquired by the Web farming system will not be in a form suitable
for the data warehouse. Also, as discussed above, the source and quality of the
content need to be judged. In any case, the information must be refined before
loading into the warehouse. However, even in its unrefined state, the information
obtained from the Web, through Web farming, could be highly valuable to the
enterprise. The capability to directly disseminate this information may be required via
textual message alerts or “What’s New” bulletins.

Refining Information
When a data warehouse is first implemented within an enterprise, a detailed analysis
and reengineering of data from operational systems is required (see Section on Load
Manager above). The same is true for Web farming. Before Web content can be
loaded into a warehouse, the information must be refined.
The processes of refining information consists of four steps:
Discovery, Acquisition, Structuring, and Dissemination.
Discovery is the exploration of available Web resources to find those items that
relate to specific topics. Discovery involves considerable detective work far beyond
searching generic directory services, such as Yahoo!, or indexing services, such as
Alta Vista. Further, the discovery activity must be a continuous process because data
sources are continually appearing and disappearing from the Web.
Acquisition is the collection and maintenance of content identified by its source. The
main goal of acquisition is to maintain the historical context so that you can analyze
content in the context of its past. A mechanism to efficiently use human judgement in
the validation of content is another key requirement.
Structuring is the analysis and transformation of content into a more useful format
and into a more meaningful structure. The formats can be Web pages, spreadsheets,
word processing documents, and database tables. As we move toward loading data
into a warehouse, the structures must be compatible with the star-schema design and
with key identifier values.
Dissemination is the packaging and delivery of information to the appropriate consumers,
either directly or through a data warehouse. A range of dissemination mechanisms is
required, from predetermined schedules to ad hoc queries. Newer technologies, such as
information
20
brokering and preference matching, may be desirable.
17.8 ON-LINE ANALYTICAL PROCESSING (OLAP)

In the previous sections we have discussed the need for building an Enterprise Data
Warehouse, followed by discussions on its structure and ways and means of populating
it with data. The data warehouse serves as the ‘memory’ of the enterprise. But, memory
is of little use without intelligence. The tools that analyze data provide the ‘intelligence’.
In this section and the ones that follow, we discuss some of the tools available for
accessing the data warehouse and transforming the data in it into information useful
from the point of view of the business or Business Intelligence.
The term, On-line Analytical Processing (OLAP) was coined by E.F. Codd in 1993 to
refer to a type of application that allows a user to interactively analyze data. Online
Analytical Processing (OLAP) is a method of analyzing data in a multi-dimensional
format, often across multiple time periods, with an aim of uncovering the business
information concealed within the data. OLAP enables business users to gain an
insight into the business through interactive analysis of different views of business
data that have been built up from the operational systems. This approach facilitates a
more intuitive and meaningful analysis of business information and assists in
identifying important business trends.
OLAP can be defined as the process of converting raw data into business information
through multi-dimensional analysis. This enables analysts to identify business strengths
and weaknesses, business trends and the underlying causes of these trends. It provides
an insight into the business through the interactive analysis of different views of business
information, that have been built up from raw operating data which reflect the business
users understanding of the business. The OLAP application contains logic, which includes
multi-dimensional data selection, sub-setting of data, retrieval of data via the metadata
layers and calculation formulas. The OLAP application layer is accessed via a front-
end query tool, which uses tables and charts to “drill down” or navigate through
dimensional data or aggregated measures (see Figure 17.4 above).
Although OLAP applications are found in widely divergent functional areas, they all
require the following key features: multidimensional views of data, calculation-
intensive capabilities and time intelligence. Figure 17.11 below illustrates the major
features of an OLAP system.

21
Fig. 17.11: The OLAP System Architecture
The OLAP Engine, which is comprised of the ‘Analytical processing logic’ and the
‘Data processing logic’ layers, shown in Figure 11 above, provides a ‘front-end’ to
the data warehouse – an interface through which a variety of general purpose
Graphical User Interface (or GUI) type tools can access the data warehouse
(see Figure 17.12 below). This arrangement makes the data warehouse data
available for non-multi-dimensional analysis as well.

Fig. 17.12: The OLAP Engine

The four major types of OLAP applications are multidimensional OLAP, hybrid
OLAP, desktop OLAP and relational OLAP. Multidimensional OLAP is based on a
multi-dimensional data base architecture. This stores data in a three-dimensional data
cube that is already in the OLAP multidimensional format for “slicing and dicing” into
analysis views. Relational OLAP products are designed to operate directly on a data
warehouse built on relational databases, through a comprehensive metadata layer.
Hybrid OLAP products primarily integrate specialized multidimensional data storage
with relational database management technology. This allows businesses to link multi-
dimensional data to the underlying source data in a relational database. The desktop
style of OLAP allows users to perform limited analysis, directly against data held
within a relational database, while avoiding many of the problems that affect hybrid
and relational OLAP styles.

17.9 DATA VISUALIZATION

Business decision-makers, use data to identify opportunities, trends, and areas of

concern in their respective businesses. Most data reaches the users in the form of
tabular reports, which they find challenging to quickly and effectively absorb the
information, spot patterns, identify aberrations, and see hidden relationships. On the
other hand, the trained human eye can easily ‘spot’ patterns that the most advanced
analytical tools would not be able to detect. Fortunately, though the volume of data
that the users need to deal with is ever expanding, data-visualization tools have been
evolving to the point that they can now transform large quantities of complex data
into meaningful visual representations that incorporate the science behind human
perception and cognition. As the old saying goes, a picture is often worth a thousand
22
words, or in this case, a thousand rows of data. Data-visualization applications render
large quantities of data in the form of basic charts, graphical indicators, scorecards,
dashboards, advanced visualizations, animations, and virtual reality environments.
By automating the fundamental aspects of data analysis, they help information users
identify trends and patterns in data that are often not apparent in traditional tabular
representations. Managers have found these applications very effective for viewing
business activity at a glance.

Data visualization involves graphical image generation by software, where the

content of the image is determined by reading digital data. The data is usually
numeric, but some software can visualize concepts drawn from text documents. The
software arranges geometric shapes (such as points, lines, circles and rectangles) to
create an interpretation of the data it read. Attributes such as proximity, size and
color express relationships between the geometric shapes. For example, Figure 13
below visualized Product, Location, Revenue, Number of items sold, and Distribution
channel information sourced from the data warehouse of a retail chain, in a single
view. Data visualization has gained adoption among business users because it
supports a variety of business tasks, including decision-making, knowledge
management and business performance management.

Three strong trends have shaped the direction of data visualization software for
business users over the last few years:

Chart Types. Most data visualizations depend on a standard chart type, whether a
rudimentary pie chart or an advanced scatter plot (like the one used in Figure 17.13
below). The list of chart types supported by software has lengthened considerably in
recent years.

Fig. 17.13: Visualization of Retail Data 23

Level of User Interaction with Visualization. A few years ago, most
visualizations were static charts for viewing only. At the cutting edge of data
visualization today, dynamic chart types are themselves the user interface, where the
user manipulates a visualization directly and interactively to discover new views of
information online.
Size and Complexity of Data Structures Represented by Visualization. A
rudimentary pie or bar chart visualizes a simple series of numeric data points. Newer
advanced chart types, however, visualize thousands of data points or complex data
structures, such as neural nets.
Figure 17.14 depicts these trends and places in their context some of the common
functionality of data visualization software. These trends also reveal a progression
from forms of rudimentary data visualization (RDV) to advanced ones (ADV), as
seen moving from lower-left to upper-right corners in Figure 1. Rudimentary forms of
data visualization (pie and bar charts and presentation graphics) have been available
in software for many years, whereas advanced forms (with interactive user
interfaces, drill-down and live data connectivity) are relatively new. The dotted lines
in Figure 14 create a life-cycle context for rudimentary and advanced forms of data
visualization by identifying three life-cycle stages: maturing, evolving and emerging.

Fig. 17.14: Charting- State-of-the-art

The wide array of visualization software supports many different chart types,
because the needs of users vary greatly. For example, business users demand pie and
bar charts, whereas scientific users need scatter plots and constellation graphs. Users
looking at geospatial data need maps and other three-dimensional data
representations. Digital dashboards are popular with executive business intelligence
users who monitor organizational performance metrics, visualizing them as
speedometers, thermometers or traffic lights.
24
Tools for charting and presentation graphics are devoted exclusively to visualizing
data. However, data visualization capabilities are commonly embedded in a wide
range of software types, including tools for reporting, OLAP, text mining and data
mining as well as applications for customer relationship management and business
performance management.

Business software for charting has evolved from static and superficial charts to
interactive visualizations with data connectivity and drill down. These advanced
capabilities are found in a new category of software the enterprise charting system
(ECS). With an ECS, users can develop and deploy chart-centric analytic applications
that provide data visualization specifically for business intelligence on an enterprise
scale.

Data visualization has long been in use in software for the study of mathematical,
statistical, geographic and spatial data. Some data visualization software for business
users has borrowed chart types originally designed for scientific users, such as
scatter plots and constellation graphs.

Whereas scientific users tolerate heavily technical functionality that may require
knowledge of programming languages or statistics, business users need this
functionality to be hidden under a friendly user interface. For data visualization to
appeal to business users, it must provide out-of-the-box value in the form of
functionality for solving business problems, such as analyzing or mining customer
behavior, product categories and business performance.

What is good visualization?

• Effective: ease of interpretation
• Accurate: sufficient for correct quantitative evaluation.
• Aesthetics: must not offend viewer’s senses
• Adaptable: can adjust to serve multiple needs
Human perception capabilities and the fact that all displays need to be mapped to a 2-
dimensional flat computer screen or sheets of paper (when printed) impose many
limitations. For example, according to one researcher, inaccuracy of human
perception increases in the following order when the respective techniques are used
for visualization: Position along a common scale, Position along identical non-aligned
scales, Length, Angle / slope, Area, Volume, Hue / saturation / intensity.

The techniques commonly used to overcome the limitations of 2-dimentional displays

and size restrictions are:
• Scaling and offset to fit in range
• Derived values (e.g. residuals, logs) to emphasize changes
• Projections and other combinations to compress information
• Random jiggling to separate overlaps
• Multiple views to handle hidden relations, high dimensions
• Effective grids, keys and labels to aid understanding.

17.10 DATA MINING

According to Berry and Linoff, Data Mining is the exploration and analysis, by
automatic or semiautomatic means, of large quantities of data in order to discover
meaningful patterns and rules. This definition, justifiably, raises the question: how does
data mining differ from OLAP? OLAP is undoubtedly a semiautomatic means of
analyzing data, but the main difference lies in quantities of data that can be handled.
There are other differences as well. Tables 5 and 6 summarize these differences.
25
Table 17.5: OLAP Vs Data Mining – Past Vs Future

OLAP: Report on the past Data Mining: Predict the future

Who are our top 100 best customers for the last Which 100 customers offer the best profit potential?
three years?
Which customers defaulted on the mortgages last in Which customers are likely to be bad credit risks?
two years?
What were the sales by territory last quarter What are the anticipated sales by territory and region
compared to the targets? for next year?
Which salespersons sold more than their quota Which salespersons are expected to exceed their
during last four quarters? quotas next year?
Last year, which stores exceeded the total prior year For the next two years, which stores are likely to have
sales? best performance?
Last year, which were the top five promotions that What is the expected return for next year’s
performed well? promotions?
Which customers switched to other phone compa- Which customers are likely to switch to the competi-
nies last year? tion next year?

Table 17.6: Differences between OLAP and Data Mining

FEATURES OLAP DATA MINING

MOTIVATION FOR What is happening in the Predict the future based only
INFORMATION REQUEST enterprise? why this is happening

DATA GRANULARITY Summary data Detailed transaction-level data.

NUMBER OF BUSINESS Limited number of dimensions Large number of dimensions.

DIMENSIONS

NUMBER OF DIMENSION Small number of attributes Many dimension attributes

ATTRIBUTES

SIZES OF DATASETS FOR Not large for each dimension Usually very large for each
THE DIMENSIONS dimension

ANALYSIS APPROACH User-driven, interactive analysis Data-driven automatic

knowledge discovery

ANALYSIS TECHNIQUES Multidimensional, drill-down, and Prepare data, launch mining

slice-and-dice tool and sit back

STATE OF THE Mature and widely used Still emerging; some parts of
TECHNOLOGY the technology more mature

Why Now?
Why is data mining being put to use in more and more businesses? Here are some
basic reasons:
• In today’s world, an organization generates more information in a week than
most people can read in a lifetime. It is humanly impossible to study, decipher,
and interpret all that data to find useful patterns.
• A data warehouse pools all the data after proper transformation and cleansing
into well-organized data structures. Nevertheless, the sheer volume of data
makes it impossible for anyone to use analysis and query tools to discern useful
patterns.
26
• In recent times, many data mining tools suitable for a wide range of applications
have appeared in the market. The tools and products are now mature enough
for business use.
• Data mining needs substantial computing power. Parallel hardware, databases,
and other powerful components are available and are becoming very affordable.
• Organizations are placing enormous emphasis on building sound customer
relationships, and for good reasons. Companies want to know how they can sell
more to existing customers. Organizations are interested in determining which of
their customers will prove to be of long-term value to them. Companies need to
discover any existing natural classifications among their customers so that the
each such class may be properly targeted with products and services. Data mining
enables companies to find answers and discover patterns in their customer data.
• Finally, competitive considerations weigh heavily on organizations to get into
data mining. Perhaps competitors are already using data mining.
Data Mining Techniques

Data mining covers a broad range of techniques. Each technique has been heavily
researched in recent years, and several mature and efficient algorithms have evolved
for each of them. The main techniques are: Cluster detection, Decision trees,
Memory based reasoning, Link analysis, Rule induction, Association rule
discovery, Outlier detection and analysis, Neural networks, Genetic algorithms,
and Sequential pattern discovery. Discussion on the algorithms associated with the
various techniques has been kept outside the scope of this text for two main reasons:
firstly, because they are too mathematical / technical in nature, and secondly, because
there are numerous, well written text books, to serve the needs of those who are
specially interested in the subject. Table 17.7 below summarized the important
features of some of these techniques. The model structure refers to how the
technique is perceived, not how it is actually implemented. For example, a decision
tree model may actually be implemented through SQL statements. In the framework,
the basic process is the process performed by the particular data mining technique.
For example, the decision trees perform the process of splitting at decision points.
How a technique validate the model is important. In the case of neural networks, the
technique does not contain a validation method to determine termination. The model
calls for processing the input records through the different layers of nodes and
terminate the discovery at the output node.

Table 17.7: Summary of Data Mining Techniques

Data Mining Technique Underlying Structure Basic Process Validation Method

Cluster Detection Distance calculation in Grouping of values in the Cross Validation to
n-vector space same neighborhood Verify Accuracy

Decision Trees n-ary Tree Splits at decision points Cross Validation

based on entropy

Memory-based Predictive Structure Based Association of unknown

Reasoning Cross Validation
on Distance and instances with known
Combination Functions instances
Link Analysis Graphs Discover links among Not Applicable
variables by their values

Neural Networks Forward Propagation Weighted inputs of Not Applicable

Network predictors at each node

Genetic Algorithms Fitness Functions Survival of the fittest on Mostly Cross

mutation of derived values Validation 27
Data Mining Applications
Data mining technology encompasses a rich collection of proven techniques that
cover a wide range of applications in both the commercial and noncommercial
realms. In some cases, multiple techniques are used, back to back, to greater
advantage. For instance, a cluster detection technique to identify clusters of
customers may be followed by a predictive algorithm applied to some of the identified
clusters to discover the expected behaviour of the customers in those clusters.
Noncommercial use of data mining is strong and pervasive in the research area. In oil
exploration and research, data mining techniques discover locations suitable for
drilling based on potential mineral and oil deposits. Pattern discovery and matching
techniques have military applications in assisting to identify targets. Medical research
is a field ripe for data mining. The technology helps researchers with discoveries of
correlations between diseases and patient characteristics. Crime investigation
agencies use the technology to connect criminal profiles to crimes. In astronomy and
cosmology, data mining helps predict cosmetic events.
The scientific community makes use of data mining to a moderate extent, but the
technology has widespread applications in the commercial arena. Most of the tools
target the commercial sector. Consider the following list of a few major applications
of data mining in the business area.
Customer Segmentation: This is one of the most widespread applications.
Businesses use data mining to understand their customers. Cluster detection
algorithms discover clusters of customers sharing the same characteristics.
Market Basket Analysis: This very useful application for the retail industry.
Association rule algorithms uncover affinities between products that are bought
together. Other businesses such as upscale auction houses use these algorithms to
find customers to whom they can sell higher-value items.
Risk Management: Insurance companies and mortgage businesses use data mining
to uncover risks associated with potential customers.
Fraud Detection: Credit card companies use data mining to discover abnormal
spending patterns of customers. Such patterns can expose fraudulent use of the
cards.
Delinquency Tracking: Loan companies use the technology to track customers
who are likely to default on repayments.

Demand Prediction: Retail and other businesses use data mining to match demand
and supply trends to forecast for specific products.

Table 17.8: Application of Data Mining Techniques

Application Area Examples of Mining Functions Mining Processes Mining Techniques

Fraud Detection Credit Card Frauds Determination of Data Visualization

Internal Audits Variation from Norms Memory-based Reasoning
Warehouse Pilferage Outlier Detection and Analysis

Risk Management Credit Card Upgrades Mortgage Detection and Analysis Decision Trees
Loans Customer Retention of Association Memory Based Reasoning
Credit Rating Affinity Grouping Neural Networks

Market basket analysis Predictive Modeling Cluster Detection

Market Analysis Target marketing Cross selling Database Segmentation Decision Trees
Customer Relationship Association Rules
Management Genetic Algorithms
28
The Data Mining Project

Step 1: Define Business Objectives— This step is similar to any information

system project. First of all, determine whether a data mining solution is really needed.
State the objectives. Are we looking to improve our direct marketing campaigns? Do
we want to detect fraud in credit card usage? Are we looking for associations
between products that sell together? In this step, define expectations. Express how
the final results will be presented and used.

Step 2: Prepare Data— This step consists of data selection, preprocessing of data,
and data transformation. Select the data to be extracted from the data warehouse.
Use the business objectives to determine what data has to be selected. Include
appropriate metadata about the selected data. Select the appropriate data mining
technique(s) and algorithm(s). The mining algorithm has a bearing on data selection.

Unless the data is extracted from the data warehouse, when it is assumed that the
data is already cleansed, pre-processing may be required to cleanse the data.
Preprocessing could also involve enriching the selected data with external data. In the
preprocessing sub-step, remove noisy data, that is, data blatantly out of range. Also
ensure that there are no missing values.

Step 3: Perform Data Mining— Obviously, this is the crucial step. The knowledge
discovery engine applies the selected algorithm to the prepared data. The output from
this step is a set of relationships or patterns. However, this step and the next step of
evaluation may be performed in an iterative manner. After an initial evaluation, there
may be need to adjust the data and redo this step. The duration and intensity of this
step depend on the type of data mining application. If the database is being
segmented not too many iterations are needed. If a predictive model is being created,
the models are repeatedly set up and tested with sample data before testing with the
real database.

Step 4: Evaluate Results— The aim is to discover interesting patterns or

relationships that help in the understanding of customers, products, profits, and
markets. In the selected data, there are potentially many patterns or relationships. In
this step, all the resulting patterns are examined, and a filtering mechanism is applied
so as to select only the promising patterns for presentation and use.

Step 5: Present Discoveries— Presentation of patterns / associations discovered

may be in the form of visual navigation, charts, graphs, or free-form texts.
Presentation also includes storing of interesting discoveries in the knowledge base for
repeated use.

Step 6: Ensure Usage of Discoveries— The goal of any data mining operation is
to understand the business, discern new patterns and possibilities, and also turn this
understanding into actions. This step is for using the results to create actionable items
in the business. The results of the discovery are disseminated so that action can be
taken to improve the business.

Selecting Data Mining Software Tools

Before we get into a detailed list of criteria for selecting data mining tools, let us
make a few general but important observations about tool selection.
• The tool must be able to integrate well with the data warehouse environment by
accepting data from the warehouse and be compatible with the overall
metadata framework.
• The patterns and relationships discovered must be as accurate as possible.
Discovering erratic patterns is more dangerous than not discovering any
patterns at all. 29
• In most cases, an explanation for the working of the model and how the results
were produced is required. The tool must be able to explain the rules and how
patterns were discovered.
Let us complete this section with a list of criteria for evaluating data mining tools.
The list is by no means exhaustive, but it covers the essential points.

Data Access: The data mining tool must be able to access data sources including the
data warehouse and quickly bring over the required datasets to its environment. On
many occasions data from other sources may be needed to augment the data
extracted from the data warehouse. The tool must be capable of reading other data
sources and input formats.

Data Selection: While selecting and extracting data for mining, the tool must be able
to perform its operations according to a variety of criteria. Selection abilities must
include filtering out of unwanted data and deriving new data items from existing ones.

Sensitivity to Data Quality: Because of its importance, data quality is worth

mentioning again. The tool must be able to recognize missing or incomplete data and
compensate for the problem. The tool must also be able to produce error reports.

Data Visualization: Data mining techniques process substantial data volumes and
produce a wide range of results. Inability to display results graphically and
diagrammatically diminishes the value of the tool severely.

Extensibility: The tool architecture must be able to integrate with the data
warehouse administration and other functions such as data extraction and metadata
management.

Performance: The tool must provide consistent performance irrespective of the

amount of data to be mined, the specific algorithm applied, the number of variables
specified, and the level of accuracy demanded.

Scalability: Data mining needs to work with large volumes of data to discover
meaningful and useful patterns and relationships. Therefore, ensure that the tool
scales up to handle huge data volumes.

Openness: This is a desirable feature. Openness refers to being able to integrate

with the environment and other types of tools. The ability of the tool to connect to
external applications where users could gain access to data mining algorithms from
the applications, is desirable. The tool must be able to share the output with desktop
tools such as graphical displays, spreadsheets, and database utilities. The feature of
openness must also include availability of the tool on leading server platforms.

Suite of Algorithms: A tool that provides several different algorithms rather than
one that supports only a few data mining algorithms, is more advantageous.

Multi-technique Support: A data mining tool supporting more than one technique is
worth consideration. The organization may not presently need a composite tool with
many techniques, but a multi-technique tool opens up more possibilities. Moreover,
many data mining analysts desire to cross-validate discovered patterns using several
techniques.

Activity B

You are a data mining consultant in a large commercial bank that provides many
financial services. The bank already has a data warehouse which it rolled out two
years ago. The management wants to find the existing customers who are likely to
respond to a marketing campaign offering new services.
30
a) Outline the data mining process, list the steps / phases, and indicate the
activities in each phase.
b) In the project you are responsible for analyzing the requirements and selecting a
toolset / software for data mining. Make a list of the criteria you will use for the
toolset / software selection. Briefly explain why each criterion is necessary.
c) What could be the business benefits of the exercise? Would the effort and cost
be justified?
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Benefits of Data Mining

Without data mining, useful knowledge lying buried in the mountains of data in many
organizations would never be discovered and the benefits from using the discovered
patterns and relationships would not be realized. What are the types of such benefits?
We have already touched upon the applications of data mining and have indicated the
implied benefits.

Just to appreciate the enormous utility of data mining, the following list enumerates
some real-world situations:
• In a large company manufacturing consumer goods, the shipping department
regularly short-ships orders and hides the variations between the purchase
orders and the freight bills. Data mining detects the criminal behaviour by
uncovering patterns of orders and premature inventory reductions.
• A mail order company improves direct mail promotions to prospects through
more targeted campaigns.
• A supermarket chain improves earnings by rearranging the shelves based on
discovery of affinities of products that sell together.
• An airlines company increases sales to business travelers by discovering
traveling patterns of frequent flyers.
• A department store hikes the sales in specialty departments by anticipating
sudden surges in demand.
• A national health insurance provider saves large amounts of money by
detecting fraudulent claims.
• A major banking corporation with investment and financial services increases
the leverage of direct marketing campaigns. Predictive modeling algorithms
uncover clusters of customers with high lifetime values.
• A manufacturer of diesel engines increases sales by forecasting sales of
engines based on patterns discovered from historical data of truck registrations.
• A major bank prevents loss by detecting early warning signs for attrition in its
checking account business.
• A catalog sales company doubles its holiday sales from the previous year by
31
predicting which customers would use the holiday catalog.
17.11 SUMMARY

Information for strategic decision-making is of utmost importance to organizations.

Due to several practical difficulties with the structure and nature of data held in
operational systems in generating the required information, a new concept known as
data warehousing has emerged. In the data warehousing environment data collected
from internal operational systems, as well as data from external sources is loaded into
a subject-oriented, time-variant, integrated, and non-volatile environment. The data
warehouse environment is carefully designed with time-span, granularity,
aggregations, dimensionality and partitioning in mind. The initial data feed to the data
warehouse as well as regular loading of data takes place in three phases: extraction,
transformation and loading, and is done by Load Manager component of the data
warehouse. The data in the data warehouse is organized in terms of fact data and
dimension data. The star and snowflake schemas used in data warehouses support
the separation of fact data and dimension data, as well as efficient query processing.
Metadata or data about data is an indispensable and integral component of a data
warehouse. Data collected from external sources can supplement internal data and
prove extremely valuable. The concept of collecting information from the Web
primarily for loading into an organization’s data warehouse is known as web farming.
On-line analytical processing (OLAP) technology provides multi-dimensional analysis
capability to the users of a data warehouse. It also provides an interface through
which other client software can access the data warehouse. Data visualization
technology has made great progress in recent years. It can act as an important tool in
the hands of trained users, by providing valuable support to spotting trends and / or
deviations in data. Apart from OLAP and data visualization tools that are user-driven
semiautomatic tools for data analysis, another class of tools, that are more automatic
in their analysis and at the same time capable of accessing and using large volumes
of data, have matured recently. This category of tools, known as data mining tools,
have found applicability in many business area. A variety of data mining techniques
and algorithms are available for data exploration and discovery of ‘novel’ patterns
and relationships. The business benefits derived from the discoveries made by the
data mining tools could be immense.

17.12 UNIT END EXERCISES

1) What are the practical difficulties of using an operational system’s database to
service the information needs of strategic decision-making?
2) Briefly explain the importance of the Extract-Transform-Load operation, and
the functions of the Load Manager component of a data warehouse.
3) Explain briefly the terms:
a) subject orientation
b) granularity
c) aggregations
d) partitioning
e) time variancy.
4) In the context of a data warehouse:
a) what is a concept hierarchy?
b) what do you mean by factual information?
c) what is a snowflake schema?
32
5) Why is it important to separate fact data from reference data in a data
warehouse?
6) Why is metadata an important component of a data warehouse? What is a
metadata repository and how is it used by the query manager component of a
data warehouse?
7) What do you mean by ‘business intelligence’? What is an OLAP Engine?
8) Explain how the progress of data visualization technology in recent years has
helped data analysts and business decision makers.
9) How can you use the Web as a data source for your data warehouse? What
types of information can you get from the Web? Explain briefly the steps
needed to ensure that only good quality, reliable data is loaded into the data
warehouse from the Web.
10) How is data mining different from OLAP? Explain briefly.

17.13 REFERENCES AND SUGGESTED FURTHER

READINGS

Adriaans, Pieter, Zantinge, Dolf, 2000, Data Mining,

Addison Wesley Longman Ltd., Harlow, England

Berry, Michael J.A., Linoff, Gordon, 2001, Mastering Data Mining,

John Wiley & Sons, Inc., New York

Inmon, W.H., 1994, Using the Data Warehouse, John Wiley & Sons
(Asia) Pte, Ltd., Singapore

Inmon, W.H., 1996, Building the Data Warehouse, John Wiley & Sons
(Asia) Pte, Ltd., Singapore

Inmon, W.H., Welch, J.D., Glassey, K.L., 1996, Managing the Data Warehouse,
John Wiley & Sons, Inc., New York

Leon, Alexis, Leon, Mathews, 1999, Database Management Systems,

Leon Vikas, Chennai

Sinha, Amitesh, 2002. Data Warehousing, Thomson Asia Pte. Ltd.,

Singapore

Ponniah Paulraj, 2003, Data Warehousing Fundamentals, John Wiley & Sons
(Asia) Pte, Ltd., Singapore

Turban E, Mclean E, Wetherbe J, 2004, Information Technology for Management,

4th Ed,. John Wiley & Sons (Asia) Pte, Ltd., Singapore

33
UNIT 18 TACTICAL AND STRATEGIC
INFORMATION MANAGEMENT :
DSS AND EIS
Structure
18.1 Introduction
18.2 Objectives
18.3 DSS Philosophy
18.4 Information Systems
18.5 Difference between DSS, MIS and EIS
18.6 Components of DSS
18.7 Group DSS
18.8 Software Tool Selection
18.9 Building DSS/EIS in an Organization
18.10 Summary
18.11 Unit End Exercises
18.12 References and Suggested Further Readings

18.1 INTRODUCTION

In the previous Unit 17, we have covered Data Warehousing and Data Mining
concepts that is exploration and exploitation of data mining techniques to obtain useful
information about the client, service provider and overall on the organization. This
gives a path of directives, understanding of self and finding the important processes
that strengthens or weakens the organization. Time management and suitable in-time
decision is the key for betterment of the organization. The present unit explores
decision-making process and the support system for management executives and
decision makers.

18.2 OBJECTIVES

After reading this unit, you should be able to:

• define decision and decision making system;
• differentiate between DSS, MIS and EIS;
• explain group decision support system;
• identify software suitability for your organization;
• describe the DSS architecture; and
• generate decision support system for your organization.

18.3 DSS PHILOSOPHY

Let us begin with understanding of the concept. A decision basically is a resources

allocation process that is irreversible, except that a fresh decision may reverse it or
overrule the earlier one. We can also define it as a reasoned choice among
alternatives. The decision maker, having authority over the resources being
allocated, makes a decision. He makes the decision in order to further some 1
objective, which is what he hopes to achieve by allocating the resources. The
decision might not succeed in achieving the objective. One might spend the funds and
yet, for any number of reasons, achieve no acceleration at all. For example: To
accelerate an R&D program is an objective, not a decision. To allocate the funds in
an effort to accelerate the program is a decision.

Simple decision is one in which there is only one decision to be made, even having
many alternatives.

A decision may be goal oriented for some degree of satisfaction for a given
objective. Objective may be driven by a decision but goal is always target/result
oriented. A decision may employ) decision analysis; a structured thought process to
attain desired results. In doing this, we can distinguish three features of the situation:
alternatives, uncertainties and outcomes. Decision analysis thus constructs
models, logical or even mathematical, representing the relationships within and
between the features of situation. The models then allow the decision maker to
estimate the possible implications of each course of action that he might take, so that
he can better understand the relationship between his actions and his objectives.
Someone who buys a lottery ticket and wins the lottery obtains a good outcome. Yet,
the decision to buy the lottery ticket may or may not have been a good decision

Decision maker may adopt strategy, which is a collection of actions. The outcome of
these actions may be uncertain, but the possible outcome is attainment of that goal set
by the decision maker. It is necessary to mention about the risk at this juncture that a
decision maker often thinks while taking the decisions. Risk can be defined as the
possibility of an undesirable result. The risk is linked with monitory befits or loss and
thus, it can be governed by risk tolerance, an individual’s attitude toward decision
and the risk involved.

With the above background, we can now easily distinguish between strategic and
tactical decisions. Strategic decision affects entire organization or major part of it
vis-à-vis organizational objectives and the policies. It has long lasting effect on the
organizational system and generally taken at the highest management level. On the
other hand, tactical decision or management control decision affects a part of the
organization for a restricted or short time. The tactical decision takes place within the
context of existing strategic decisions. Thus, the contextual and effective
management depends on good and timely information. The decision making process
may use various techniques depending on the situation. We can define decision-
making as an activity of deciding appropriate action in particular situations. With
relevant and useful information the decision-making may reduce the uncertainty.

The quality information is a component that is dependant on the good datasets.

The good data can be described as data having :
• accuracy, completeness and have authorization. This integrity in data is a base
feature;
• in time availability of up-to-date records when actually needed;
• summarization to an appropriate level of aggregation;
• easy access to the relevant information; and
• relevance to the decisions being made.
The importance of these factors depends on the nature and impact of the decision.
For example, in a manufacturing organization, the decision on the budgetary
provisions for advertisement depends on the accurate and up-to-date data of sales of
the product.

2
Simon provided a general model of any decision making process. The Simon model
(Figure 18.1) describe the sequence of decision making as :
• intelligence: data in the general area is examined, leading to a specification of
the problem to be solved;
• design: problem is formulated, solutions developed and tested for feasibility;
• choice: selection is made amongst alternatives; and
• implementation: the chosen alternative is implemented and substantiated to
the stakeholders in the organization.

Intelligence

Design

Choice

Implementation

Fig. 18.1: Simon's Model

Having the basics of decision-making process, the decision support system (DSS)
thus can be defined as the system that supports the decision-making. There are
various definitions of DSS that links to information retrieval with the help of
computers to use of information to support managers. Let us see that how some of
these definitions describe DSS :

Table 18.1 : Various definitions of DSS

S.No. Definition given by Definition

1. G.W. Peter Keen and Decision support implies the use of computers to:
Michael S. Morton, 1978 a) assist managers in their decision processes in
semi-structured tasks;
b) support rather than replace, managerial judgment;
c) improve the effectiveness of decision making rather
than its efficiency.

2. Ralph H. Sprague, 1979 Information system featuring an integrated system

composed of decision models, database and decision
maker to support decision-making.

3. James Hick, 1993 An integrated set of computer tools that allow a

decision maker to interact directly with computers to
create information useful in making unanticipated
semi-structured and unstructured decisions.

4. Carroll W. Frenzel, 1996 Decision Support System are analytical models used to
increase managerial or professional decision making by
bringing important data to view.

5. William E. Leigh and A set of computer based tools used by managers

Michael E. Doherty, 1998 in connection with his or her problem solving and
decision making duties.
3
These definitions points that :
1) decision support systems are information systems;
2) decision support systems are used by managers;
3) decision support systems are used in making decisions;
4) decision support systems are used to support, not to replace, people;
5) decision support systems are used when the decision is semi-structured or
unstructured;
6) decision support systems incorporate a database of some sort; and
7) decision support systems incorporate models.

One word that attracts us is “Model”. Let us see the following figure that describes a
simple DSS model :

Knowledge with Aim

Decision
Assessment Tool

Information with Context Knowledge

Predictive Models

Structure Data Data Warehouse

Quantified Data Statistics and Data Mining

Quantified Facts

Fig. 18.2 : DSS Model

As can be seen, the decision knowledge emerges from the quantified data using
statistical and data mining tools, predictive models and the assessment tools.

Activity A
1) Let us take an example of a travel agent selecting destinations for clients base on
the clients’ expressed interest in vacation activities and agents knowledge of what
is available in various locations. Do you think that a computerized DSS will help in
decision-making? If not, why? If yes, how? (Based on Mallach, 2002).
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18.4 INFORMATION SYSTEMS

The information system evolution has an interesting history. Many information

systems researchers and technologists have had built and investigated Decision
Support Systems (DSS) for more than 35 years. Decision Support Systems evolved
early in the era of distributed computing. Initially it was very expensive to build large-
scale information systems as the computers were in their infant stage. Powerful
mainframe systems made it more practical and cost-effective to develop
Management Information Systems (MIS) in large companies. MIS focused on
providing managers with structured, periodic reports. Much of the information was
from accounting and transaction systems.

Lets us examine various information system before actually differentiating between

DSS and Management Information System (MIS). The different types of specialized
information systems that support management decision making generally depend on
the level of management, and the degree of structure in the decisions.

The earliest information system that became practical was Model-oriented

Management Decision Systems (MDS) and Strategic Planning Systems (SPS).
It was first that the marketing and production managers used MDS for to coordinate
production planning.

Gordon Davis, a Professor at the University of Minnesota, who defined a

Management Information System (MIS) in 1974 as “an integrated, man/machine
system for providing information to support the operations, management, and
decision-making functions in an organization”.

Transaction Processing System (TPS) is a system that influences the decision-

making on the basis of inventory. In want of updated inventory that transaction could
be delayed or could take place with appropriate substitute.

Information Reporting System (IRS) is one where information is retrieved for

pending decisions or overdue transactions. Interactive Financial Planning System
(IFPS) became popular decision support tools that originated from conventional
spreadsheet system of finance management. In this system, the model can be
separated from the data.

Executive Information System (EIS) evolved from single user model-driven

Decision Support systems and improved relational database products. The first EIS
used pre-defined information screens and were maintained by analysts for senior
executives. An EIS is a data-driven DSS that is intended to provide business
intelligence to middle and senior-level managers.

The Office Information (automation) System (OIS) has to do with the effective
and efficient flow of organizational information for carrying out day-to-day work. On
the other hand, the Personal Information System (PIS) helps individual middle and
senior executives to derive best possible solution for a given problem. It can also be
linked with problem-solving process for supporting strategic decision-making. The
information systems that used to improve communication and coordination among
members of a group of executives who collaborate on a set of joint tasks, known as
Group Decision Support System (GDSS). We shall be studying about GDSS in
later sections.

5
An Expert System (ES) is specialist knowledge information base that help an expert
to decide on crucial and item specific problems. Strategic information system
(SIS) enables an organization to obtain a competitive advantage over its rivals or to
prevent them from taking advantage over the information.

The commonality among all above system is provision of information to a decision

maker. With advent of computers, the information management, its warehousing and
retrieval in judicious way became easier, particularly with the availability of desktop
systems. As on date, in any organization, the information is maintained on the
computers and the same is used for the benefit of the organization. Each individual is
thus, an important component in the information system.

18.5 DIFFERENCE BETWEEN DSS, MIS AND EIS

With the exposure to all the above information systems, let us find out the differences
between DSS and MIS. Table 18.2 enlists some basic differences between decision
support system, management information systems and executive information system.
As the name implies, the later two are the systems that provide information that may
or may not be used for making a decision whereas the support information provided
for deciding on the policy, planning or implementation is the basic component of DSS.
Let us find out the characteristics of the three systems :

DSS:

• DSS generally provide support for unstructured, or semi-structured decisions

(decisions that cannot be described in detail)

• DSS problems are often characterized by incomplete or uncertain knowledge,

or the use of qualitative data

• DSS will often include modeling tools in them, where various alternative
scenarios can be modeled and compared

• Investment decisions are an examples of those that might be supported by DSS

MIS:

• MIS is generally more sophisticated reporting systems built on existing

transaction processing systems

• Often used to support structured decision making (decisions that can be

described in detail before the decision is made)

• Typically will also support tactical level management, but sometimes are used at
other levels

• Examples of structured decisions supported by MIS might include deciding on

stock levels or the pricing of products

6
Table 18.2 : Difference between DSS, MIS and EIS

Dimension DSS MIS EIS

Focus Analysis, decision Support Information processing Status Access

Typical Users Analysts, professions, Middle, lower levels, sometime Senior Executives Expediency
Served managers (via intermediaries) senior executives

Impetus Effectiveness Efficiency

Application Diversified Areas where Production control, sales Environmental scanning, performance
Managerial Decisions are made forecasts, financial analysis, evaluation, identifying problems and
human resource management opportunities

Database(s) Special Corporate Special

Decision Support Supports semi-structured and Direct or indirect support, mainly Indirect support, mainly high level and
Capabilities unstructured decision making; structured routine problems, unstructured decisions and policies
mainly ad-hoc, but sometimes using standard operations,
repetitive decisions research and other models

Type of Information to support Scheduled and demand reports; News items, external information on
Information specific situations structured flow, exception customers, competitors and the
reporting mainly internal environment
operations

Principal Use Planning, Organizing, staffing Control Tracking and control

and control

Adaptability to Permits individual judgment, Usually none, standardized Tailored to the decision making style
Individual User what-if capabilities, some of each individual executive, offers
choice of dialogue style several options of outputs

Graphics Integrated part of many DSS Desirable A must

User Friendliness A must where no A must

Desirable
intermediaries are used

Treatment of Information provided by the Information is provided to a Filters and compresses the
Iinformation EIS/or MIS is used as an input diversified group of users who information, tracks critical data and
to the DSS then manipulate it or summarize information
it as needed

Can be programmed into DSS Inflexibility of reports, cannot get Instant access to the supporting
Supporting Detailed
the supporting details quickly details of any summary
Information

Model Base Standard Models are available but Can be added, usually not included or
The Core of the DSS
are not managed limited in nature

Construction By users, either alone or with By vendors or IS specialists By Vendors or IS Specialists

specialists from IS or IC
departments

Hardware Mainframes, micros or Mainframes, Micros or Distributed system

distributed distributed

Nature of Large computational Application oriented, Interactive, easy to access

Computing capabilities, modeling performance reports, multiple databases, on-line access,
Packages languages and simulation, strong reporting capabilities, sophisticated DBMS capabilities
applications and DSS standard statistical, and complex linkages
generators financial, accounting and
management science models

Adapted from the Information Systems resource materials by Denis Manley, School of Computing at Dublin Institute of Technology.

7
EIS:
• EIS support a range of decision making, but more often than not, this tends to
be unstructured
• EIS support the executive level of management, often used to formulate high
level strategic decisions impacting on the direction of the organization
• These systems will usually have the ability to extract summary data from
internal systems, along with external data that provides intelligence on the
environment of the organization
• Generally these systems work by providing a user friendly interface into other
systems, both internal and external to the organization
Let us now explore differences among the three information systems based on the
dimensions (Table 18.2).
In the following sections, we shall be studying various components of a DSS, building
simple architecture for DSS and GDSS.

18.6 COMPONENTS OF DSS

The basic model of a DSS might be a spreadsheet containing the data. The user may
make changes in some of the parameters of spreadsheet and observe the impacts on
the outcomes. For example, one may create a spreadsheet to support various
investment decisions or an individual may create a spreadsheet to model a home loan
and see the impact on repayments of changing parameters like interest rates,
principal size and the term of the loan. Another example could be from an education
institution. A university may create a spreadsheet while entering into a contract with
another offshore educational institution to provide its degree programs available in
different locations. The spreadsheets then can be used to understand the set of costs,
fixed and variable, and to compare its income in a range of circumstances, like
student numbers, the impact of money exchange rates or delivery cost depending on
the mode, etc. This allows for sensitivity analysis and risk management.
More sophisticated DSSs are often systems in their own right, although they may be
add-ons to some existing transaction processing system. Let us examine basic
components of a DSS model through Figure 18.3.

Decision Interface

DSS Modeling
Software

Information/
Knowledge base

Database

Fig.18.3 : Key components of a DSS

The Figure 18.3 clearly defines that the data likely to be derived from a database
underpins the information on which good decisions are made. Hence, the database is
the base component of a DSS model. The information or knowledge base contains
information about the intricate relationships that may exist between the data. This
defines the rules that underpin the various knowledge systems or the relationship
8
among the activities. For example, the relationships could be between costs, demand
and profitability in a product costing.
The modeling software enables the user to experiment with various scenarios, i.e. to
see the impact of varying parameters when they are changed on the outcomes, or to
undertake other mathematical analysis, i.e. sensitivity analysis, linear programming,
queuing models and to find out risks involved in each of the scenario.

Based on the database, knowledge base and the relations, the decision interface is
created where the user component plays an important role. Here, the users are either
senior management or middle management with lower levels of technical expertise.

Sometimes the underlying database might be a data warehouse, we have already

studied in the previous unit. The real application of a data warehouse thus emerges in
DSS though a data warehouse is not an operational business system, but is usually a
large database that is updated periodically from a range of sources. The sources of
data may be internal transaction processing systems, or may be from external
sources and they are sometimes used to bring data together from a range of
incompatible or isolated internal systems.

Activity B

Given are some examples of knowledge retrieval for decision-making process.

Please give information system nomenclature to each of them :
1) An organization has to give annual money incentives to its employees serving at
various levels. The management considers pay scales, last year’s profits and
losses, product sale and benefits extended to the employees along with self-
appraisal to arrive at the decision.
....................................................................................................................
....................................................................................................................
....................................................................................................................
2) The course materials in a distance education institute are to be distributed to all
its registered students, but it is reported that the quantum required for
distribution is not available in sufficient numbers. A senior officer makes an
appropriate decision.
....................................................................................................................
....................................................................................................................
....................................................................................................................
3) The marketing wing of a TV manufacturing company after considering the
sales and forthcoming international Olympic games in the country decides on
the advertising policy for company to be adopted for next six months.
....................................................................................................................
....................................................................................................................
....................................................................................................................
....................................................................................................................
4) Information on the blood group, allergy to penicillin and CT Scans, X-rays, blood
pressures, blood sugar and blood urea along with temperature charts are
obtained for a patient likely to be operated by a doctor.
....................................................................................................................
....................................................................................................................
....................................................................................................................
....................................................................................................................
9
18.7 GROUP DSS

Having basic understanding of decision-making process and DSS, let us find out what
is Group Decision Support Systems (GDSS). GDSS are interactive computer-based
systems that facilitate decision-makers working together as a group to arrive at a
solution for unstructured problem. The group of executives analyzes problem
situations and performs group decision-making tasks. The GDSS provides
mechanisms to help the users to coordinate and keep track of on-going projects, allow
them to work together thru computer-supported communication, collaboration, and
coordination. Typical applications of GDSS include email, awareness and notification
systems, videoconferencing, chat systems, multi-player games, and negotiation
systems.

The group decision support system addresses the vary issue of human behaviour in a
given environment along with computer science and management. It is found that a
task assigned to a group is a typical information processing system that usually
provides a judicious solution with alternatives. The GDSS has several implications
that can be listed as follows :
• Enable all participants to work simultaneously thereby promoting broader input
into the meeting process and reducing dominance of few people;
• Provide equal opportunity for participation;
• Enable larger group meetings that can effectively bring more information,
knowledge, and skills for a given task;
• Provide process structure to help focus the group on key issues and
discourages irrelevant digressions and nonproductive behaviors;
• Support the development of an organizational memory from meeting to meeting;
and
• Individual satisfaction increases with group size.
The software developed for GDSS focuses principally on assisting brainstorming and
mechanizing voting, two of the rare events in business meetings. We have reached
the stage of mechanizing word-oriented problems in group meetings.

Group support systems are designed to support group decision-making through

specialized software, hardware and decision support tools. This can be defined as a
combination of computer, communications and decision technologies working in
tandem to provide support for problem identification, formulation and solution
generation during group meetings. Broadly, the fundamental goal of GDSS is to
support the exchange of ideas, opinions, and preferences within the group. The
primary goal of GSS is to reduce process loss attributed to disorganization within the
group, social issues such as member dominance, inhibition, peer pressure and other
recognized difficulties of group interaction and to improve overall decision quality.
The taxonomy of GDSS is forced by three factors :
1) Group size,
2) Communication channel (face-to-face vs. computer-mediated) and
3) Task type.
GDSS are believed to improve the quality of group decisions by minimizing process
losses and maximizing process gains. Process gains occur when certain aspects of
the meeting improve the eventual outcome or result and process losses delay or
reduce the final outcome. Thus, the overall meeting outcome is reliant upon the
process gains versus the process losses.
10
Let us now study some of the terms used in GDSS.

Groupthink : Groupthink is a tendency of group members to fall in to similar thought

patters and to disapprove the opinions that do not confirm to the patterns. This
creates problems in group decision making process and sometimes become big hurdle
in reaching to an appropriate decision. GDSS provides an opportunity to overcome
the problems of groupthink where junior members of the group get equal chance to
put forth their opinions that could not have been possible in face-to-face situations.

Media Richness is defined as the potential information carrying capacity of data

transmission medium. The information processing depends on the richness of the
communication medium. Figure 18.4 describes the level of communication richness
across various media. In GDSS, the richness of a medium depends on availability of
number of communication channels and the feedback that is received by the decision
makers. In face-to-face situation, the communication richness is very high as the
feedback and inputs are received through words used, facial expression, body
language and tone. An important aspect is also selection of communication medium
as this varies from task to task. For example, a low medium richness is more
effective in money transactions via an ATM whereas to understand loaning system of
bank highly rich medium may be required.

Low High
E-mail Electronic Audio Video Face-to-face
Communication Communication
Chat
Richness Richness

Fig.18.4 : Degree of Communication Medium Richness

Groupware : It is a term which relates to GDSS but is not identical. It is defined as a

computer based system that support groups of people engaged in common goal and
provide interface to a shared environment (Ellis, 1991). The field that studies how
people use groupware is called Computer-Supported Cooperative Work
(CSCW). The relations among the DSS, GDSS and Groupware can be understood
through Figure 18.5.

Decision Group Group-

Support DSS ware
System

Fig.18.5 : Relationship Among DSS, GDSS and Groupware

11
As can be seen, GDSS is a part of DSS whereas groupware may or may not be
essential component of DSS though it has some properties similar to GDSS.

War room, also known as electronic meeting room or electronic boardroom, is a

facility created for GDSS by networking computers for each member participant. It is
equipped with a large screen video display that can be seen by all the participants.
There is a facilitator to control the display and have access to all members’
computers. The software used have the capabilities to plan a session and group
members can propose agenda items through it. It can organize and structure
members’ comments and can record them as organisational memory for longer and
effective use.

Let us now look at the system of GDSS software procurement.

18.8 SOFTWARE TOOL SELECTION

Selecting a software package for organisational DSS is a major strategic decision as

it has intense implications for the competitiveness for the organization for many
years. As procurement of software involves money, involvement of senior managers
along with technical managers in decision-making is important and crucial. The
procurement processes need to have various stages to make a right decision on this
issue. Some of the processes involve technical evaluation of software, identification
of information needs for the company, meeting with vendors and assessing the
reliability of senior executives at the vendor company as strategic partners. In this
section, we shall be discussing the procedurals issues in procurement of DSS
software.

Evaluation Steps

The evaluation of the software basically involves four steps, covering creation of
evaluation team, need identification, product evaluation and negotiations
with vendors. The evaluation team is key and thus it is vital to ensure availability of
team members while making the project plan. Some points to be remembered in
formulation of evaluation team are :
a) identification of suitable members
b) role specification for them
c) anticipation and management of time commitment
d) leadership selection
e) creating directions for the team.
The evaluation team should reasonably be small (5 to 7 members) with a project
leader and the team should submit a regular report on findings to the senior
management.

Needs Assessment

The next step is need assessment for enterprise-wide DSS. The evaluation team is
supposed to create criteria and interact with the personnel who will be impacted by
implementation of DSS. The role of evaluation team in communicating with the
people is to crucial and is to be effective to determine the needs from those who
want DSS, who will be expected to use DSS and who are concerned, opposed, bored
or out of reach. The communication could be question based where interaction should
not be over selling or under done. Questions can be related with the functions and
tasks, controls and security needs, operational performance needs and on the design
12 architecture strengths and problems.
Product Evaluation

The third step is evaluating a product. It is important to mention here that there is no
software package available that can fit in any organisational DSS needs. The
package is to be customized for the organization and one may need to explore other
users and their experiences with the package. The product evaluation may involve
the following three stages :
a) Preliminary evaluation : testing of actual products available in the market and
their screening. The strengths and weaknesses of the vendor is also to be
checked.
b) Functional screening and review of the product on the laid criteria : examination
of cost, design, support and installation requirements.
c) Operational performance evaluation : screened packages have to be tested
operationally either with the demonstration versions or pilot tested for its
scalability, load bearing capacity, direct and indirect costs, after sale support,
training, etc.
Negotiating with Vendors

The responsibility of final selection needs to have negotiations with the vendor who
has submitted the project proposal with costs, infrastructure requirements. The
negotiations are based on the installation plan and post-installation reviews. The role
of evaluation team gets converted in to a project team as no vendor can guarantee on
the performance of DSS when it is actually implemented. On the other hand,
sustainability and reliable information extraction with constant support from the
supplier with up gradations and appropriate changes in software are to be negotiated
at the time of finalization of the software.

Activity C

Please name at least two information systems for each high, medium and low
communication richness media.

S.No. High Communication Medium Communication Low Communication

Rich Media Rich Media Rich Media
1.

18.9 BUILDING DSS/EIS IN AN ORGANIZATION

To build a DSS or EIS in an organization, it is important to understand the

organisational environment in which it has to be functional. The environment here can
be explained as the available hardware, operating system on the computers, approach
to link or network computers, users, their work and workload, the links between the
departments and information or data flow, hierarchies among the different levels of
human resources, their interactivity level, etc. This total setup is covered under
information system architecture.

The architecture of an information system refers to the way its pieces are laid out,
types of tasks assigned to each piece, interaction among pieces and interaction of
pieces with outside system. Martin (1991) defines information system architecture as
“A written expression of the desired future for information use and management in
an organization, that creates the context within which people can make consistent 13
decisions”.
Let us look at the flow diagram (Figure 18.6) of course development process
adopted by Indira Gandhi National Open University for generating a course that you
are reading as an example of information system architecture.

Conceiving the Idea of an

Academic Programme

Preparation of Concept Paper

and Presentation Before
Academic Body for Approval

Database on Learners'
Requirements, Formal Educational Pre-development Survey and
Opportunities & Institutional Reach Need Assessment

Database on Subject Universe Syllabus Formulation and Sub-

and Recent Researches in it division of Course in Blocks
and Units

Database on
Course Writers Appointing Course Writers and
Scheduling the Writing Activity

Rough Editing of Units, Checking

its Structure, Treatment of
Subject Language and Fomat
Revision of Materials

Word Processing, Editing and

Database on Progress CRC Preparation
Copyright Permission,
Graphic Designing, Lay outing

Fig.18.6 : Example of an Information System Architecture

We are not explaining the diagram, as it is self-explanatory, but please note the data
gathering situations and try to identify the decision making points.

To build a DSS in organization, one has to consider the spectrum of DSS that
organization is going to use. The following are to be well thought-out to approach
systematically :
• Strategic, tactical and operational decisions of the organization,
• Unstructured, semi structured and structured decisions,
• All levels of management and knowledge workers in the organization,
• Major functions, product or line of business,
• Hierarchy in operations, and
• Geographical division of the organization.
14
Let us refer to Figure 18.7 showing generic view of a DSS architecture.

External Data Users Programmers

Network and Communication Facilities

Hardware and Operating System Platform

User Interface

End-User
Query Tools

Model Management Model Development

DBMS
System Tools

Database Model Base

Fig.18.7 : Model DSS Architecture

Source : Mallach

Having an exposure to information system architecture, let us see that how a DSS is
build in an organization. There are three approaches that are commonly used for
development of an information system :
a) The traditional System Development Life Cycle (SDLC) approach considers
identification of user requirement, analysis of existing system, designing overall
system and its designing, development (with simultaneous implementation) and
testing. Each of these steps culls a written document, reviewed and approved
before starting next step. The basic advantage of this approach is that it covers
all the areas and maintains a record of them. On the other hand it is too rigid for
a system that is frequently changing or updating.
b) Prototype Approach considers user requirement and either applies prototype
system design before system design or evolves prototype design after
development and exercising a prototype system. In the former style, the
implementation of the system design done on the basis of prototype design and
development and testing follows whereas in the later approach, while evolving
the prototype system or rapid application development all the changing factors
are taken care of. The implementation of system is faster in later approach.
Both prototype approaches are flexible and responsive to the development
process. The drawback in the prototype approach is longer development
schedule and possibility of using wrong tool or using the right tool in the wrong
way.
c) End-user Development approach provides an opportunity for development of
DSS by the decision makers themselves. Spreadsheet is a common low-level
end-user development tool. The approach provides extensive control of the user
on the system including target schedules and problem understanding-solving
environment.
15
The DSS project development is teamwork where each team members has definite
role to play. The members of the team are the users, responsible for solving the
problem that the DSS is to help with, the intermediately, who help the users of DSS,
the DSS builder, who are technical experts and have technical decision making
power on the hardware, the technical support person, who are programmers
integrating existing packages into overall system and do customized programming,
and the toolsmith, who uses tools to be used in constructing the DSS.
Having had the defined approach and the team in place, who have already completed
the tasks of need assessment and software selection, the following step may be
useful in building the DSS (Mallach).
a) Obtaining and installing the DSS hardware;
b) Installing the DSS and making it run on intended hardware;
c) Providing user access to the system;
d) Creating and updating the database;
e) Training the user on the new system;
f) Documenting the system for its user and who will responsible for maintaining it
in the future;
g) Making arrangements to support the user as the system is being used;
h) Transferring ongoing responsibility for the system from its developers to the
operations or maintenance part of the MIS group; and
i) Evaluating the operations and use of the system.

Let us now examine some of the example of DSS that might include :
• scheduling systems, such as:
• staff roistering systems
• room timetabling
• production scheduling
• project scheduling and management
• product costing systems with predictive capabilities
• investment decisions
•· strategic planning applications

18.10 SUMMARY

In this unit, we have read about the decision-making process and the support system
for management executives and decision makers. The decision support system (DSS)
was defined as the system that supports the decision-making and now we know that
DSS is a information systems, used by managers in making decisions as support, not
to replace, people and used when the decision is semi-structured or unstructured. We
also understood that DSS incorporate a database of some sort and also models.

Through this unit, we defined various information systems and also differentiated
between DSS, MIS and EIS. We also explored Group DSS and its implications. While
building DSS of an organization, we explored the tips for procurement of software for
DSS and system architecture.

This unit has broadly exposed the theories and practices of DSS and EIS. It is
suggestive to read more materials to get deep information on the subject matters.
16
18.11 UNIT END EXERCISES
1) Define decision support system in your own words. Exemplify using your
organizational context.
2) What are the characteristics of DSS? What are its components?
3) Differentiate between DSS, MIS & EIS with the help of suitable examples.
4) Why is DSS more of a facility than a system?
5) Explain the major functions of DSS and its applications.
6) What is group DSS ? What are the components of group DSS?

18.12 REFERENCES AND SUGGESTED FURTHER

READINGS

Adelman, Leonard (1992) Evaluating Decision Support and Expert Systems,

New York : John Wiley and Sons.

Mallach, Efrem G. (2000) Decision Support and Data Warehouse System,

New Delhi :Tata Mcgraw Hill.

McGrath, Joesph Edward (1984) Groups : Interaction and Performance,

New Jersey : Prentice Hall.

Murthy CSR (2002), Management Information Systems: Text and Applications,

Third Edition, Himalaya Publishing House, Mumbai

Sadgopan S. (1997), Management Information Systems, Prentice-Hall if India

Private Limited, New Delhi, India

Turban E, McLean E, Wetherbe J, 2004, Information Technology for

Management, 4th Ed. John Wiley & Sons (Asia) Pte, Ltd., Singapore

17
UNIT 19 INTELLIGENT SUPPORT
SYSTEMS
Structure
19.1 Introduction
19.2 Objectives
19.3 Artificial Intelligence
19.3.1 Brief History of AI
19.3.2 Goals of AI
19.3.3 Applications of AI
19.3.4 Building AI
19.4 Expert System
19.5 Neural Networks
19.6 Fuzzy Logic
19.7 Genetic Algorithms
19.8 Summary
19.9 Unit End Exercises
19.10 References and Suggested Further Readings

19.1 INTRODUCTION

The need for intelligent support systems has arisen because a need was felt to solve
not-so-trivial problems by way and means of systems that are much more capable
than humans. It was felt necessary to use skillfully coded real-world knowledge and
rules in to a computer, which in turn simplifies the problem solving effort. Expert
systems and knowledge-based systems are efforts in this direction. Evolution of
techniques like artificial neural networks, fuzzy logic and genetic algorithms has really
enhanced the problem-solving capacity of these systems. In this unit we will give you
a brief introduction about them so that you can appreciate these concepts.

19.2 OBJECTIVES

After reading this unit you should be able to:

• Explain artificial intelligence, and expert systems;
• Describe Neural Networks, Genetic Algorithms and Fuzzy Logic;
• Explain the efforts made in creation of these systems; and
• Identify and discuss their advantages in business applications.

19.3 ARTIFICIAL INTELLIGENCE

The advent of Artificial Intelligence (AI) is as old as a half decade when the first
modern computer emerged. Frankly, what a computer does is that it simulates
collective thinking of several humans to process high volumes of data at a high speed
and accuracy. We are witnessing a shrink in the size and cost of the computer, but
there is growth in its capability. The growth in capabilities actually means that
68
computers are becoming more and more competent of delivering more than the
human abilities. These enhanced competencies are then used to deliver more power
in business activities. The goal of the AI scientists had always been to develop a
thinking machine that solves problems in a way that would be considered “intelligent”
if done by a human. This forms the basis of our definition to artificial intelligence.
Oxford dictionary defines the two terms as “artificial” means not natural or imitating
nature and “intelligence” as quickness in understanding the information. The term AI
was first introduced three decades ago by McCarthy, “Intelligence is the
computational part of the ability to achieve goals in the world”. Artificial intelligence
(AI) thus can be defined as a field that focuses on building techniques to enable
computer systems to perform activities that are quick and are above human
intelligence. Patterson (1990) defined artificial intelligence, as “AI is a branch of
computer science concerned with the study and creation of computer 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 a natural language or perceive and comprehend a visual scene, and
systems that perform other types of feats that require human types of intelligence”.
Konar (1999) defined AI as “the simulation of human intelligence on a machine, so as
to make the machine efficient to identify and use the right piece of ‘knowledge’ at a
given step of solving a problem”.

The need for AI has arisen because a need was felt because but for the tiny and
trivial problems, it was becoming very difficult to solve not-so-trivial problems. It was
the wastage of time and effort. To counter this, it was felt necessary to use skillfully
coded real-world knowledge and rules in to a computer, which in turn simplifies the
problem solving effort.

19.3.1 Brief History of AI

As mentioned earlier, AI has roots as old as half a decade when the computer
became a commercial reality. It will be interesting to have a feel as to how these
developments occurred and finally took the shape in which AI is today. The table
given below is the time-line of the developments in the filed of AI

Table 19.1: Brief History of AI

S.No Period Works

1 Works before 50’s Demonstration that a simple computer processor (Turing Machine) is capable of
manipulating symbols as well as numbers (machine intelligence), emergence of
cybernetics (study of communication between human & machine) as a field, new
approaches to language theories, computer becomes a commercial reality,
emergence of theories like information theory, Boolean algebra, switching theory
and statistical decision theory

2 Works after 50’s Development of chess playing programs, works like language translation,
automatic theorem proving and new programming languages. Development of
FORTRAN, LISP, computational linguistics, pattern recognition & natural language
processing

3 Works in the 60’s Program to play checkers, resolution as an inference method in logic; first
knowledge based expert system (DENDRAL), development of a large interactive
general purpose program that solves mathematical problems and simulation of
complicated processes of thinking.

4 Works in mid 70’s Solving more complex problems of practical

to present interest, expert systems that diagnose and prescribe medicines, expert systems that
deals with real-life problems, uncertainty modeling, non-monotonic and spatio-
temporal reasoning etc. specialized programs about narrow problem areas.

(Based on Patterson, 1990) 69

We can see that all these developments were the result of the desire of the human
beings to solve problems that were not so trivial. To overcome the difficulties that
were faced in solving these problems, they thought of putting intelligence into a
computer (essentially based on the knowledge of the then society). The theme of all
these efforts was around the concept of making a program intelligent, by providing it
with high quality specific knowledge about some problem area. This collaborative
and collective intelligence led the machine do the tasks better than the humans. AI
has taken off from there and what we are getting today is an improved build-up on
the older systems. Let us see what are the goals on which AI work.

19.3.2 Goals of AI
AI works on the following goals:
1. Emulate Humans: From the very basic definitions of AI it has become clear
that AI’s main goal is to identify solvable and out of the ordinary information
processing problems, and solve them. In other words, AI’s primary goal is to
emulate human intelligence and not only emulate but do things in a better way.
2. Solve Problems that Require Intelligence: Be it a program that plays
chess or a system that has all the intelligence of a dictionary, the primary aim of
the AI has always remained to study and solve problem that are knowledge
intensive and require a high degree of intelligence.
3. Develop Expert Systems on Real-Life Problems: AI has real-life
problems in the world as its pivot. AI’s goal is to develop experts systems that
simulate the real-world problems and solve them automatically.
4. Enhance Interaction: AI works for enhancing human-human, human-
computer and computer-computer interaction. Computers have now accepting
more and more varied use-interfaces for input and output processes like voice,
vision and virtual reality etc.
Table 19.2: Generations of Computers

S. No. Generation Description Capability

1 First Generation Inspired by Babbage’s analytical Could perform “number

engine, these computers were made crunching operations”
of thermo-ionic valves.

2 Second Generation These computers were made of Mainly used for commercial
transistors and were smaller in size as data processing and payroll
compared to their predecessors. creation.

3 Third Generation These computers were made of Could perform massive

Integrated circuits (IC). Many computations in real-time
electro-mechanical robots were
based on these.

4 Fourth Generation These computers came up with high- Operations became more fast.
speed VLSI engines. Many electronic
robots were based on these.

5 Fifth Generation Emerged in the period 1981-90 in Could process “intelligence”.

Japan with AI embedded in them. Could process natural
languages, Play games,
recognize images and prove
theorems.

Based on Konar, Amit (1999)

70
19.3.3 Applications of AI

AI is employed in virtually every branch of science today. But before going into the
details of applications where AI plays a significant role, we will go back to how
computers were developed and what were their capabilities at different point of
times. Following table gives these details:

One can see that there is a growth in the capabilities of the computers as they move
from one generation to the other. In fact, this is addition of more and more
intelligence in the systems that are doing wonderful works presently and are poised to
do even better in the future.

You can find a lot of varied applications of AI. It has been applied in game playing,
automated grammar checking, speech recognition, vision systems, and expert systems
like weather forecasting, diagnostic systems, financial decision making and
classification systems, computer simulated natural processes, mathematical theorem
proving, natural language understanding, intelligent control and scheduling & planning.

Let us consider some of the examples of these applications:

1. Game Playing: Chess is one such game for which many programs are created
using artificial intelligence. Chess has about 10120 states in a typical game.
Many of such programs have done remarkably well like getting a grand-master
status or getting a high ELO rating etc. Most of these programs were capable
of thinking move up to five to six levels ahead. Feeding all possible moves into
the computer and making it capable to search the best possible move according
to the situation was the strategy of these programs. You make like to recall that
Deep Blue Chess program beat world champion Gary Kasparov.
2. Automated Grammar Checking: You must have used a word-processor and
used its spelling and grammar-checking feature. While spelling checker module
works well, there is lot that has to done for the grammar-checking module. The
features available in current software are far less than satisfactory. These
software fumbles at using proper pronouns, gender or giving proper meaning
etc. For an efficient program of this kind, it has to be given “intelligence” about
knowledge from the real world.
3. Speech Recognition: You must have seen the software that types the words
as one speaks. These are called phonetic typewriters. Speech understanding
has found good commercial value in the recent times e.g. speech recognition
systems are used in reservation through telephone. Dragon Naturally speak, is
one such software that needs a mention.
4. Natural Language Understanding: To understand a natural language like
English one has to understand the syntactic (analysis of grammar, compilation)
and semantic (meaning of sentences from association of words) interpretation
of words. Robots have been designed that understands few instructions, but
days are not far when a robot will fully understand a speech in the natural
language. There have been examples where full document have been translated
in many different languages. Site’s http://babelfish.altavista.com/ translation of
web pages, is also based on natural language processing.
5. Vision Systems: Any image is a two-dimensional array of pixels. In vision
systems, image is processed for noise and partitioned into objects of interest.
These objects are recognized and finally the image is interpreted. Many banks
uses face recognition programs. There are systems like “intelligent character
readers” which recognizes handwriting. Computer vision has many other
applications too such as baggage inspection, manufacturing inspection etc.

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6. Expert Systems: An expert system consists of a knowledge base, database
and an inference engine for interpreting the database using the knowledge
embedded in the knowledge base. There is sound reasoning process that has to
build in order to create an expert system. AI techniques have played significant
role in creation of expert systems for weather forecasting; diagnostic systems
such as medical diagnosis systems, pathology diagnosis system & customer
assistance systems etc.; financial decision making systems like fraud detection
systems used in credit card companies & systems that expedite financial
transactions and classification systems like financial decision making systems &
NASA’s galaxy-classification system.
7. Computer Simulated Natural Processes: Applications of AI are not limited
to human and natural processes, it is extended to other processes too. A model
based on AI tools predicts the walk of a cockroach and its basic behaviors. The
model correctly predicted many of behavioral processes pertaining to
cockroach.
8. Mathematical Theorem Proving: There had been many attempts of proving
mathematical theorems with the help of AI tools. Inference methods are used
to prove new theorems.
9. Intelligent Control: firstly an expert controller sets a set of rules. The rule
whose premise matches the dynamic plant parameter response is selected and
implemented. Fuzzy logic is also used in such cases in many industrial plants
e.g. the power control in a nuclear reactor. There are application using fuzzy
logic and artificial neural networks for plant estimation i.e. for designing a
process estimator.
10. Scheduling & Planning: You must be aware of the importance of planning a
time schedule of a set of events to improve the efficiency. Artificial neural nets
and genetic algorithms have been employed to solve these problems. Typical
examples of these applications are class-routine scheduling problem, Automatic
scheduling for manufacturing and rerouting scheduler for airlines etc. Operation
Desert Storm used these systems for planning logistics of people and supplies.

19.3.4 Building AI
While building artificial intelligence in an organization one has to think about many
factors such as observation, reasoning and action. Take the case of a human being; it
has sensory functions attached to various parts of its body with which it observe the
things in the real world. You might have seen different software for medical
diagnosis, e.g. homeopathic software contains a set of symptoms and test results that
have been obtained and inputted to the system manually. Whenever a patient inputs
its symptoms then the diagnosis system matches it with the recorded ones to give a
diagnosis. The second step in this is the reasoning part. This is dependent on the
inference, decision-making and classification from what is observed in the first step.
There are many tools available for this step. These tools could be artificial neural
network, logical deduction system, heuristic searching a problem space, Bayes
network inference, genetic algorithms etc. The third and the final step in the building
process is the action. We will go back to the example of the human beings. When
the observation is done and reasoning is made it is the time for action e.g. if you
touch a hot thing, you develop a reasoning that if you touch that, you will be hurt. The
action is that you would not touch a hot thing. In real world you may come across
different kind of problems. There would be problems that could be not solved by
mathematical or logical algorithms. Such problems can only be solved through
intuitive algorithms. These problems are the problems that are deemed in to the AI
domain. The key to AI approach is intelligent search and matching. If you were given
a problem you would be doing the following tasks:
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1) Knowledge Representation and Reasoning: You will first try to represent
the facts in some way. Logic is built to answer questions like “what” & “how”.
One tries to collect all facts whether missing, implicit, explicit or probabilistic to
gather knowledge to solve a problem. You build rules to infer from the
knowledge thus collected. In case you have many ways to infer something then
you would like to go for the path that is al the smallest distance from the goal.

2) Heuristic Search: One has to develop rules of thumb to solve the constraints
in the problem space. As we have earlier mentioned that there are about 10120
states in a Chess game. As we move from one state to another state we search
for the best possible solution at each state. The better the solution found at each
state, the fewer steps it will require to reach to the next state.

3) Inference: While searching you would come across many rules. In many
cases you will be able to infer some new rules from some facts. You can build
reasoning to seize a fact from other facts. The reasoning could be non-
monotonic reasoning or reasoning under uncertainty.

4) Learning: Learning could be parametric learning, inductive learning and

analogy-based learning. In parametric learning the adaptive learning process
adjust the parameters of the subject that is learning. In inductive learning the
learner makes generalizations from the examples and in analogy-based learning
the learner makes comparisons form another similar problem or take the benefit
of resemblance of this situation with others.

5) Planning: While a reasoning problem works for satisfying a particular

condition from a given set of data and knowledge. A planning problem works
for a bigger goal. It deals with the determination of a methodology for achieving
a goal form the initial stages. It moves from general facts to basic facts, from
basic facts to particular facts about a situation. Planning stage create an
approach for achieving goals in terms of a sequence of primitive steps or
actions.

19.4 EXPERT SYSTEMS

Amongst the most noteworthy developments in the field of Artificial Intelligence (AI)
is the advent of “expert” or “knowledge based” systems. Joint efforts by human
experts yielded systems that can diagnose diseases, fly planes, drive vehicles and
configure computer systems at performance levels that can exceed the best human
expertise. Question thus arises that what are expert systems? To put it most simply:
Expert systems are computer programs that use knowledge to solve problems
competently and successfully. They are similar to human experts in the sense that
they also use logic and heuristics to solve problems, they also make errors and they
also learn from their errors. This expertise is easier to store, retrieve, transfer and is
cost-effective and permanent. Johnson (1983) described the term ‘expert” in the
most accurate manner as, “ An expert is a person who, because of training and
experience, is able to do things the rest of s cannot; experts are not only proficient but
also smooth and efficient in actions they take. Experts knows a great many things
and have tricks and caveats for applying what they know to problems and tasks; they
are also good at plowing through irrelevant information in order to get at basic issues,
and they are good at recognizing the problems they face as instances of types with
which they are familiar. Underlying the behavior of experts is the body of operative
knowledge, we have termed expertise…” Thus we can now define expert systems.
Patterson (1990) described expert systems as, “ An expert system is a set of
programs that manipulate encoded knowledge to solve problems in a specialized
domain that normally requires human expertise. An expert system’s knowledge is
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obtained from expert sources and coded in a form suitable for the system to use in its
inference or reasoning process.” You might recall the earlier description; an expert
system consists of a knowledge base, database and an inference engine for
interpreting the database using the knowledge embedded in the knowledge base.
There is sound reasoning process that has to build in order to create an expert
system.

Brief History of Expert Systems

Expert systems emerged as a consequence of the developments in the artificial

intelligence field in early 70’s at a few leading US universities like Stanford. They
started as problem solvers using specialized domain knowledge. We will discuss a
few early successful systems. This is summarized in the table given below:

Table 19.3: Brief History of Expert Systems

S. No. Expert System Year Developer Functions

1 DENDRAL Stanford University Determines the structure of chemical compounds

Late 60’s
/ Meta- using constituent elements and mass
DENDRAL spectrometry data. Later adapted inductive
learning form

2 MYCIN/ Mid 70’s Diagnoses infectious blood diseases and

THEIRESIUS/ Stanford University determine therapies. Started with 200 rules to
GUIDON/MYSIN build over 600 rules by early 80’s

3 PROSPECTOR 1974- Stanford Research Assists geologists in the discovery of mineral

1983 Institute deposits. First computer system to assist
geologists.

4 XCON Late 70’s Digital Equipment Select and configure components of complex
Corporation & computer systems. Expert system work in
Carnegie-Mellon computer systems is typified by XCON.
University

5 ACE Early 80’s Bell Laboratories Equipment fault diagnosis and integrated circuit
design. AT&T uses it for identify trouble spots
Early 70’s in telephone networks
6 HASP/ SIAP Stanford University Identifies ship types by interpreting data from
& Systems Control hydrophone arrays that monitors regions of the
Technology ocean

(Based on inputs from Patterson, 1990 and Waterman, 1986)

These were some of the path setting work in the expert systems. These works
provided the base for other systems to build on them. Today one can see a plethora
of applications of expert systems in virtually all areas like agriculture, chemistry,
computer systems, electronics, engineering, geology, information management, law,
manufacturing, mathematics, medicine, meteorology, military science, physics,
process control nd space technology etc.

Working Principles of Expert Systems

Expert System is a result of the interaction between the system builder (knowledge
engineer) and many domain experts.

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Source : Based on Waterman, 1999

Fig. 19.1: Building Knowledge into an Expert System

Expert systems are computer systems that are based on knowledge rather than the
data. They accumulate this knowledge at the time of system building. Knowledge is
programmed and kept in such a manner so that it can be browsed and appended from
time to time. Expert systems possess a very high level of expertise in the area for
which they are made for. The best thing about expert systems is that they grow over
time and but for the initial expenditure incurred in building them, they work in a cost
effective manner. Expert systems have predictive modeling power i.e. they are
capable of describing the effects of new situation on the data and the solution. Expert
system uses symbolic representations for knowledge (rules, networks or frames).
This compilation often becomes a quick reference for best strategies, methods and
consensus decisions. This becomes a permanent knowledge base. Thus, one can say
that expert systems have a permanent memory. Expert systems gives access to the
user to understand it’s reasoning and can be used to provide training. This is possible
because of its knowledge base; it can provide trainees with experiences and
strategies from which to learn.

Building Expert System

The process of building an expert system is also called knowledge engineering. As

we have discussed earlier that there is an interaction between the domain expert and
the expert system builder which generates the knowledge into the expert system. The
latter is also called “knowledge engineer”. There is further to it. The remaining
players in the building of the expert system are the expert system building tools, the
user and the expert system itself. Let us have a quick tour on their meaning. Expert
system is the collection of programs that solves problems in a particular area; domain
expert is a person who is knowledgeable about that particular problem area and has
solutions to those problems; knowledge engineer is a computer science expert who
translates the domain expert’s knowledge into the one, which is understandable by the
computer; expert system building tool is the programming language that is used by the
knowledge engineer to build the expert system. And finally the user is the one, which
will use the expert system.

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Waterman (1999) has highlighted the relationship between the two in the following
figure.

Source : Figure adapted from Waterman, 1999

Fig. 19.2: The Players in the Expert System Game

Waterman further stated, “ The figure suggests that the user may be a tool builder
debugging the expert-system-building tool includes both the language, a knowledge
engineer refining the existing knowledge in the system, a domain expert adding new
knowledge to the system, an end-user relying on the system for advice, or a member
of the clerical staff adding data to the system”.

Knowledge Representation in Expert Systems

The knowledge can be represented in expert systems in three ways. These ways are
rules, frames and semantic nets. A rule-based system consists of a rule-base
(permanent data); an inference engine (process); and a workspace or working
memory (temporary data). Knowledge is stored as rules, which are of the form
IF some condition THEN some action
For example:
IF it is hot THEN turn the AC on
IF the temperature is more than 350 THEN it is hot
IF the weather is not so hot but it is humid THEN also turn the AC on.
When the IF condition is satisfied by the facts, the action specified by the THEN is
performed. These rules may modify the set of facts in the knowledge base. These
new facts can be used to form matches with the IF portion of the rules. This
matching of rule IF portions to the facts can produce “inference chains”. The
inference chains displays how a conclusion is reached in an expert system. Rules can
be used in two ways: - by forward chaining and backward chaining.

Forward Chaining: Suppose you have a database which has some information
stored in it and you want to generate some new rules and test them with respect to
the database. Then by the forward chaining method you start with a fact that is
present in the database. You infer some rule that comes due to a consequence of a
given fact. Next is that you add that inference as fact in the database. In other words
you have appended the database. Once a fact is added, it interacts with other facts
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and infers some new fact that again gets added into the database. This process is
continued till there is no further inference. The process is “forward” because it uses
the facts on the left side to derive information on the right hand side.

Backward Chaining: Suppose you want to test whether a fact exists in the
database. The process first checks the database for that fact. If the fact that you
want to establish is not there, then the process tires to find other facts that conclude
that fact. It tries to establish those facts first, which conclude the fact you are
interested in. The process continues in the same manner till sufficient evidence is
found for existence/non-existence of the fact being tested.

The essential difference between forward chaining and backward chaining is in the
way the facts are searched in the database. In some situations, backward chaining
proves to be cost-effective. If your intentions were to infer a particular fact then by
employing forward chaining you would waste a lot of time and efforts. This is
because of the fact that experts systems are generally based on hundreds and
thousands of facts. On the other hands if you were looking for some new information
from the database then by forward chaining you would be able to find a lot of rules
that will be executed as a consequence of the existing facts. Forward chaining can
derive a large number of inference chains and situations. These facts and rules could
be further used to append the database.

Activity A
1) You must have used a word-processor and used its spelling and grammar-
checking feature. What additional features would you intend to have for the
grammar-checking module? Mention the limitations you have observed in your
word-processors module.
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2) Mention five activities that you encounter in your day-to-day life that could be
not solved by mathematical or logical algorithms. Take one such example and
solve it (up to 2-3 stages only) by intuitive approach as done in AI systems.
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19.5 NEURAL NETWORKS

Neural networks are a great aid to computing. They involves mathematical structures
that are capable of learning. Neural network is a set of connected input/output units
where each connection has a weight associated with it. Neural networks are
primarily used for predictions. Neural networks use past data and fit a model on it to
predict and classify. Neural networks as the name suggest resembles the namesake
found in human beings. Neural networks begin with an input layer, which is given
some weight before it connects to the output unit. The output unit processes the
values of input variable and weights with a combination function. There are many
hidden layers between the input and output layer. A neural network is trained by
assigning weights on the inputs of each of the units so that the network predicts the
variable under question in the best possible manner. According to Barry & Linoff
(2001), “Neural Networks are a good choice for most classification and prediction
tasks when the results of the model are more important than understanding how the
model works. Neural Networks actually represent complex mathematical equations,
with lots of summations, exponential functions and any parameters. These equations
describe the neural network, but are quite opaque for human eyes… Neural networks
do not work well when there are man hundreds or thousands of input features…
Neural network works well with decision trees… decision tress are good at choosing
the most important variables- and these can be used for training a network.”

A major difference between neural networks and the statistical modeling is that the
former is based on the rules it explores from the data while the latter is based on
previously specified functional form.

As our nervous system is made up of neurons that are connected with a nerve fiber,
neural nets also have nodes that are connected. As a neuron receives signals from its
neighboring neurons, processes them and move those signals forward, the neural net
also do the same functions.

Fig. 19.3 : A Single Node Neural Network

Thus artificial neural networks are electrical analogues of the biological neural nets.
The most common application of neural network is in the field of machine learning.
One can find many applications of neural networks in control, automation, robotics,
computer vision, scheduling, knowledge acquisition and planning. They are useful in
many applications because they derive meaning from complicated or imprecise data.
These situations are otherwise complex and undetectable by humans and other
computer techniques. Neural Networks are good at identifying patterns or trends in
data and hence they are well suited for prediction and forecasting needs.
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A neural network can have multiple layers. Suppose, we have a training data and we
measure attributes for training data. These measured attributes form the input layer.
Weights are given to the input layer according to their importance in the problem.
The output from the input layer is assigned some weights and this feed to the second
layer, known as hidden layer. Similarly the weighted outputs of this hidden layers can
be fed to the next hidden layer and so on. Finally these outputs go into the output
layer, which emits network’s prediction. This process is explained in the figure given
below. Figure shows how a training sample x1, x2,…xi is fed to the input layer.
Weighted connections exist between each layer denoted by wij.

If there is a single hidden layer then the network is called a two-layer neural network.
Similarly a network containing two hidden layers is called a three-layer neural network.

Input Hidden Output

Layer Layer Layer

Source: Han & Kamber(2001)

Fig. 19.4 : A Multilayer Neural Network

Business Applications of Neural Networks

There are immense applications of Neural Networks in business. It is just not possible
to mention all of them. However an attempt has been made to give you a glimpse of
the purposes for which neural networks are being applied. Following are some of the
applications of the artificial neural networks Pujari (2001), Konar (2000):

1) Used in investment analysis to predict the movement of stocks, currencies etc.,

from previous data. They have become worthy successors of linear models.

2) Used in monitoring the state of aircraft engines. Parameters like vibration levels
and sound are used to predict or forecast engine problems.

3) Used to improve marketing mailshots. They are employed to find a predictive

mapping from the known data about the clients and their response. This
mapping is then used to direct further mailshots.

4) A simple neural network based diagnostic expert system, which diagnoses and
recommends treatments for acute sarcophagal disease.

5) In the development of a system for criminal investigation for voice classification

scheme. A multi layered feed forward neural net was trained. Speech features
of the suspect are supplied to the neural net, which then processes the output
signals.

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6) In path planning of the mobile robots. Mobile robots works on sensors that help
them recognize the world as the humans do. Neural Network based
navigational model has been applied for online navigation of such robots. They
help the robot to receive sensory information, generate control commands for
motion and direction and finally set the schedule of motions.
7) For acquisition of knowledge in an expert system. Fuzzy neural networks are
applied for automated estimation of certainty factors of knowledge from proven
and historical databases of a typical reasoning system.
8) In recognition of human faces from their facial images. Self-organizing neural
nets are applied for this task. Weights are given to each multi-dimensional point
on the 2-d plane and then it is mapped to a single point. This process is repeated
for all the 360 images (corresponding multi-dimensional points.)
9) In cognitive learning for applications in psychological modeling. Fuzzy neural
networks are used to mimic the activities of “long term memory” of the
biological cognitive system.
These applications are never-ending. As said earlier, neural networks are useful in
many applications because they derive meaning from complicated or imprecise data.
These situations are otherwise complex and undetectable by humans and other
computer techniques. We now move on to another important concept i.e. fuzzy logic
and its business applications.

19.6 FUZZY LOGIC

Traditional logic has many limitations when one deals with uncertain and incomplete
knowledge. Unfortunately knowledge in the real world is never certain and complete.
Fussy logic came into picture as a concept that extends the expressive power of
traditional logics. You would recall that in standard set theory, an object is either a
member of a set or it is not. There is no middle way. There is no partial containment.
The characteristic function of a traditional set assumes values 1 and 0, on the basis of
membership. If we generalize this concept and allow the characteristic function to
assume all values between 0 and 1, then we talk about the fuzzy sets and the value
assumed by the characteristic function denotes the degree or level of membership.

Prof. Zadeh of University of California, Berkley in 1965, first introduced fuzzy sets.
The main objective was to define the fuzziness and vagueness. Fuzzy set theory
forms the basis of Fuzzy logic. It is a relatively new discipline that has found
applications in automated reasoning of expert systems. Fuzzy models require defining
of memberships functions. These functions can often be defined on the basis of
intuitive knowledge. Because of their simplicity to use and cost effectiveness, fuzzy
logic and fuzzy computation are good prospects for the next generation expert
systems. The universe of fuzzy set can take any value in the real interval 0 and 1. Let
us take an example to explain the concept better. Suppose we want to define the
membership of batsmen of national level in a country.

We may define the membership characteristic function u as follows.

for 0 < × < 50

1 for x > 50

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here x is the national average of the batsman. The interpretation is if a batsman has
an average of more than 50 runs he is strong member of the fuzzy set. An average of
40 means his membership is partial with uA(x)=0.5, similarly an average of 30 would
get uA(x)=0.2 and so on. The characteristic function for fuzzy sets provides a direct
linkage to fuzzy logic.

Business Applications of Fuzzy Logic

1) Fuzzy matching is used in matching problems that is an essential operation in
speech recognition, automated reasoning and expert systems. Computing fuzzy
distance between two objects forms the basis of such matching.
2) Fuzzy relations are used in modeling a physical system, whose variations of
output parameters with input parameters are known.
3) Fuzzy logic has been applied in management of ambiguity of the data by
analyzing the knowledge about predecessors to determine the truth-value of a
proposition.
4) Fuzzy reasoning is used for identifying criminals from imprecise and
inconsistent word description of criminal history.
5) Fuzzy logic is used in medical diagnostic systems in identifying diseases on the
basis of symptoms by calculating fuzzy beliefs.
There are many other uses of Fuzzy logic like its applications in specialized belief
networks called Fuzzy Petri Nets (FPN) but are beyond the scope of this introductory
unit.

19.7 GENETIC ALGORITHMS

Genetic algorithms are stochastic algorithms. They were first proposed by Holland in
1975. They are based on the natural process of biological evolution. These methods
follow the “Survival of the fittest” principle of Darwin. They are called “genetic”
because they work on the same principles as genetics: The members, which adapt
well to the environment, are selected for reproduction and produce offspring. Poor
performers die without offspring.

Fig. 19.5 : Process of Genetic Algorithms

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The figure above can be summarized that genetic algorithms let the data structures
face the environment and carry forward with only the fittest data structures. There
are a few concepts that need to be highlighted.

Mating: Mating is done by randomly selecting a bit position in the eight bit string and
concatenating the head of one parent to the tail of the other parent to produce the
offspring e.g. the fifth bit crossover point of parents xxxxxxxx & yyyyyyyy will
produce offspring xxxxxyyy & yyyyyxxx.

Inversion: Inversion is done on a single string. The inversion concatenates the tail of
the string to the head of the same string e.g. sixth bit inversion of string abcdefgh will
be ghabcdef.

Mutation: In mutation bits at one or more randomly selected positions are altered. It is
done to ensure that all locations of the rule space are reachable so as to avoid local
minima.

Business Applications of Genetic Algorithms

1) Genetic algorithms have been used in intelligent search problems. These
problems include games, routing problems in VLSI circuits and navigational
planning of robots.
2) Genetic algorithms have been used in many optimization problems like the
traveling salesman problem and the job shop scheduling problems etc.
3) Genetic algorithms and artificial neural networks together have many
applications in machine learning such as adaptive control etc.
4) Genetic algorithms are used in data mining for the tasks of hypothesis testing
and refinement, optimal decision tree induction and event prediction etc.
5) Genetic algorithms are also used in classification problems and for evaluating
the fitness of other algorithms.
Activity B
1) Identify and describe two good applications areas for artificial neural networks
and fuzzy logic within a university environment.
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2) Suppose you want to define the membership of young people. Think of a
membership characteristic function u and calculate its value for different ages.
You can take a person as young if he is less than 30 years of age. Also, plot the
values of the membership function with respect to age.
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19.8 SUMMARY

To overcome the difficulties that were faced in solving many real-life problems,
intelligence was put into a computer (essentially based on the knowledge of the then
society). The theme of all these efforts was around the concept of making a program
intelligent, by providing it with high quality specific knowledge about some problem
area. This collaborative and collective intelligence led the machine do the tasks
better than the humans. AI has taken off from there and what we are getting today is
an improved build-up on the older systems. Expert systems emerged as a
consequence of the developments in the artificial intelligence field. They started as
problem solvers using specialized domain knowledge. As the time passed by these
systems kept building on themselves and what we are getting today is much better
versions of their predecessors. More and more algorithms and methods were
developed to solve problems more efficiently.

Some of these include artificial neural networks, fuzzy logic and genetic algorithms.
They have immense applications in the field of AI and expert systems. Genetic
algorithms are used with neural networks and fuzzy logic for solving more complex
problems. They are jointly used and hence are often referred as “soft-computing”.
This unit has tried to provide you with an introduction of these developments.

19.9 UNIT END EXERCISES

1) What do you understand by Artificial Intelligence? What are the factors that
highlighted the need of developing AI? What are the goals of AI?

2) Discuss the application of AI with respect to the developments in the field of

computers. Also discuss the major works that typically describes the earlier
work done in AI.

3) If you have to build artificial intelligence in your organization, what factors you
would think of and take into consideration. Mention those factors in a stepwise
manner.

4) Define Artificial Intelligence and mention some of its current applications.

5) What are expert systems? Mention the working principles of expert systems.
Also discuss how knowledge can be represented in expert systems.

6) What are artificial neural networks? Discuss their business applications.

7) Discuss the salient features of the genetic algorithms. How do they differ from
the artificial neural networks? Explain mutation and mating with the help of
examples.

8) What are the factors that differentiate traditional logic and fuzzy logic? Explain
the concept of membership characteristic function and also discuss the
Business applications of Fuzzy Logic.

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19.10 REFERENCES AND SUGGESTED FURTHER
READINGS

Berry Michael. J.A. & Linoff Gordon S. (1997), Data Mining for Marketing,
Sales and Customer Support, John Wiley & Sons, 1997.

Han Jiawei & Kamber Micheline (2001), Data Mining: Concept and Techniques,
Morgan Kaufmann, Elsevier Science, India

Johnson, P.E (1983), “What Kind of expert should a system be?” The Journal of
Medicine and Philosophy, vol 8, pp 77-97, 1983.

Konar, Amit (1999), Artificial Intelligence and Soft Computing: Behavioral &
Cognitive Modeling of the Human Brain, CRC Press, Boca Raton, Florida, 2000

McCarthy J (1968). “ Programs with common sense” as cited in Patterson (1990)

Patterson, D.W., Introduction to Artificial Intelligence and Expert Systems,

Prentice-Hall, Englewood Cliffs, NJ, 1990

Pujari, Arun K (2001), Data Mining Techniques, Universities Press, India

Russel, S. and Norvig, P., Artificial Intelligence, McGraw-Hill, New York, 1996

Waterman Donald A.(1999), A Guide to Expert Systems, Addison Wesley Longman

Inc, U.S.

Turban E, McLean E, Wetherbe J, 2004, Information Technology for

Management, 4th Ed., John Wiley & Sons (Asia) Pte. Ltd., Singapore

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UNIT 20 EMERGING TRENDS IN IT
Structure

20.1 Introduction
20.2 Objectives
20.3 Competitiveness of ICT
20.4 Technology for Convergence: Hardware and Software Issues
20.5 Convergence of IT and Consumer Electronics: Emerging Trends
20.6 E-Commerce: Essential Components and Future Issues
20.7 E Commerce Design Issues
20.8 Privacy in the Context of e-Commerce
20.9 Summary
20.10 Unit End Exercises
20.11 References and Suggested Further Readings

20.1 INTRODUCTION

Information and communication are the two basic needs of modern world, which
cannot be compared among them for establishing any importance of one over other,
may it be a personal life or business. In fact these two are most of the time
complementary and sometimes supplementary to each other to maximize the benefits
drawn of information and communication systems. Therefore tools and techniques
are always sought to address the issues raised while attempting to utilize these two
for developing leverage.

During the late 1980s and early 1990s, the rapid growth of distributed processing and
the Internet changed the telephony world. The convergence of voice and data
networks enables the delivery of advanced, revenue generating services, which were
not feasible in the circuit-switched environment. Today’s converged network
combines voice services with packet networks, using signaling as the underlying
technology to provide the independent control network that connects the two.

Whenever the issue of convergence is discussed in the context of information

technology it is essential to refer the convergence of information and communication
systems so that devices can be unified for different application services. It is evident
that the convergence of technologies will continue to be an important trend and the
key to growth for various sectors within the broader technology arena. The potential
of new emerging technologies will play a key role in the development of new markets
for new systems and with new and innovative ideas.

E-commerce is perhaps the most widely acclaimed buzzword, which gained

This unit is an attempt to touch upon some of these aspects.

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20.2 OBJECTIVES
After reading this unit you should be able to:
• Describe the competitiveness of information and communication technology;
(ICT) with respect to modern business practices and their impact on
economies;
• Describe technology issues involved in convergence with respect to software and
hardware requirements and trends;
• Analyze global market penetration of ICT and prepare strategies for survival; and
• Analyze emerging scenario in e-commerce.

20.3 COMPETITIVENESS OF ICT

Information and communication technologies have been regarded as the tools for
increasing efficiency levels in all spheres of operation in the postindustrial age. ICTs
are also setting the foundation for new industrial order. This belief is equally shared
by developed nations and most of the developing nations. For evaluating the impact of
ICTs one has to go through the era known for high industrial growth i.e. latter half of
the current century in which they have come into widespread use. The dramatic and
continuing liberalization of world trade is indeed a central feature in global economy
and the spread of ICT and goods derived using ICTs has been rapid with an
accompanying emphasis on the issue of “competitiveness”. The word competitiveness
is widely used to reflect the growing needs of business enterprises to evaluate their
relative position with regard to their domestic competitors in international market and
foreign competitors in domestic markets.

An enterprise is said be competitive if it can cut its share in international and

domestic markets from its rivals. Similarly, the term competitiveness can also be used
in the context of national economy to judge whether the nation is moving ahead in
building market shares in business sectors that promote economic growth,
employment, and other measures of social developments. The use or production of
ICT is not itself, a principal determinant of social welfare measures like growth or
employment, but it does play an important role in the ability of nations to participate in
economic activities where growth and employment prospects are more favorable
than would be available otherwise. The use of ICTs strengthens the efforts of
enterprises to achieve higher levels of competitiveness to contribute towards
expansion of economic activities promoting growth, employment, and other social
developments.

Historically, every major change in global economic activities has witnessed a

complete transformation of industrial growth patterns involving different processes,
practices and materials yielding explicit gains. In industrial nations, most of these
gains had been realized by the first half of the 20th century owing to rapid
industrialization. During the second half of the 20th century, the industrial growth of
developing nations may have been constrained by the existence of the productive
capacity of already industrialized nations. By the first half of the past century, most of
the possible gains from this transformation had been realized in industrialized nations
while developing nations, for many reasons, have experienced difficulties in fully
entering this process. The ICTs provide an opportunity for addressing manufacturing
productivity advances in developing nations, which would allow a substantial
expansion of industrial output. Such output expansion, if large enough, could
substantially influence the creation of employment and the creation of wealth.
2
Because ICTs are often laborsaving, a large increase in output is necessary to raise
the derived demand for labor, through productivity improvement. Otherwise the
impact of ICTs may be to reduce labor inputs, an undesirable, and alarming outcome
for developing nations if there are not sufficient employment alternatives. The
promise of ICTs seems to be partially supported by observed technical progress made
by the developing nations. Much of this progress has been the direct result of the
application of materials science to the production of modern ICTs. The earliest, and
still the most important of these applications, is the use of semiconductors for the
production of computers, telecommunications equipment, and related electronic
devices. Technological improvement in semiconductor technology, as measured by
the cost and speed of performing narrowly defined functions, has advanced at rates
that were unprecedented for other manufacturing technologies such as power
generation using fossil fuels or improvements in machine operating speeds through
improvement in mechanical technology. The rapid advances in technical
characteristics, which have also led to dramatic falls in price per unit of performance,
have generated optimistic expectations about the contributions of information
technology to manufacturing productivity growth.

Productivity gains from the use of information technologies involve improved control,
smoother integration of production processes, and better control in the acquisition of
inputs and the disposition of outputs. Communication technologies play important
roles, particularly in co-ordination of functions, such as conveying timely information
about inventories and scheduling throughout a distribution system. The productivity
gains from ICTs are greatly realized through cost-reduction, in material inputs, labor,
and capital. The relative shares of these reductions may differ across industries and
over time, but labor saving is a principle source of cost-reduction. In addition, ICTs
usually make it possible to produce more or higher quality with the same levels of
inputs, resulting in productivity advances that are independent of changes in input use.

Growth in the use of ICTs in manufacturing appear to involve greater flexibility and
changeover speeds as well as shortened and accelerated flows of materials for
processing, work in process, and finished good inventories. These changes suggest a
transformation in methods of organizing production systems from traditional models of
mass production. The trade-off between the creation of new organizational models
and the augmenting of old is essential for evaluating the issue of competitiveness.

The use of ICTs, have also made it possible to expand other economic activities,
conventionally referred to as the “service sector”. The contributions of ICTs in the
service area are apparent with the fact that ICTs are a major component in the
predominant form of physical capital that service industries employ. It can be said
without reservations that ICTs are the tools for productivity improvement in the post-
industrial or information society age for achieving higher productivity gains that match
or exceed those that have been historically experienced in manufacturing
technologies. With such productivity gains it would be possible to indefinitely sustain
the growth of economic output and productivity despite the trend towards a growing
share of this output being produced in service sectors. The possibility of indefinite
growth in the production and consumption of services is encouraging sign for both
developed and developing economies.

For developed nations, an increasing share of output in services is consistent with

increasing investments in human capital or the dispersal of industrial activities
domestically and internationally to reduce localized environmental problems. For
developed nations, the growth of services provide domestic growth opportunities that
can absorb labor displaced by productivity improvements in agriculture and industry
and that are less challenged by imports from developed or other developing nations.
The corresponding problem for developing countries is to find ways to upgrade the
value and quality of services so that service sector employees experience increasing
3
wages over time. Doing this, of course, requires improvements in the productivity of
the service sector. Thus, both developed and developing nations face a common
challenge in finding ways to improve service sector productivity. Again, however, it is
the issue of organizational change that provides a fundamental barrier to translating
the rapid technological advances of ICTs into productivity gains. Developing and
implementing the organizational changes would permit ICT use to have the same
productivity impact in services as previous organizational changes had in
manufacturing sector. For example, in financial services, where the ICTs do support
economies of scale in transactions processing they also permit the creation of many
new services.

There are several reasons to believe that developing nations could benefit from
productivity improvements in services. First, in developing nations, governments often
absorb relatively large shares of national output and most government activities are
involved in the delivery of services. Hence, improvements in productivity in
government services could free resources for private investment. Second, services
are often close complements to manufacturing. For example, the effectiveness of the
retail and distribution sector of an economy influences the growth of manufacturing
by providing more efficient market outlets for manufactured output. Third, developing
nations are increasingly faced with the problems of harmonizing their production
systems with the use of ICTs in developed nations so that they can serve as suppliers
and sub-contractors in an increasingly global division of labor. This process of
harmonization requires adoption of ICTs not only at the “service” level of the firm,
such as the front office and the communication links to developed nation suppliers,
but also within the production process to control quality and scheduling in ways that
are consistent with customer demands. Many of these harmonization problems,
nonetheless, are reflected in demands for services that, without the extensive use of
ICTs, serve as barriers rather than complements to improvement in international trade
and that absorb resources that could otherwise be used directly for production.
Fourth, and finally, productivity improvements in both services and manufacturing are
worthwhile wherever they may be achieved. Having more output using the same
amount of inputs is of benefit in whichever sector it is achieved. To the extent that
ICT use achieves greater productivity through releasing labor, the problem is to
develop other opportunities for their employment (or remove barriers to this
adjustment) rather than to lock them into employment patterns where they have low
productivity.

ICT-intensive retailing activities, the systems that manufacturers employ must

increasingly be compatible with the emerging new industrial models based on more
intense ICT use. Examples of these developments include the growing emphasis on
international quality standards with high levels of information content, the
specification of product design using computer aided design and manufacturing, and
the co-ordination of product delivery such as “Just in time” and “sales driven”
production using high levels of ICT. Developing countries thus have an “offensive”
strategic interest in adopting ICTs to maintain their competitiveness in export
markets. Moreover, the liberal international trade environment that has characterized
the “new world order” offers developing nations access to new markets, although
developed countries maintain substantial import barriers in some areas, provided that
they open their own markets to import competition. Imports from nations that employ
ICTs to augment the flexibility and tighten control of the production process can offer
formidable competition even with large differences in wage rates. Competition for
domestic markets from exports in developing nations makes it necessary for
developing country enterprises to adopt similar tools for achieving flexibility and
variety that their competitors in developed and other developing nations are coming to
employ. Effective use of ICTs requires knowledge from a range of disciplines and the
solution of difficult problems of synthesizing technological knowledge and managerial
“know how”. The absence of well-established models for effectively achieving this
4
synthesis suggests that the creation of substantial variety of knowledge creating and
using capabilities will improve the likelihood of adaptive success in realizing the
potentials from ICT use. Many of the problems of implementing the new models of
organization require skilled and flexible human resources that can solve a variety of
problems.

20.4 TECHNOLOGY FOR CONVERGENCE:

HARDWARE AND SOFTWARE ISSUES

The public switched telephone network (PSTN) was designed to accommodate a

single application voice and was not built for services such as data and video. During
the late 1980s and early 1990s, the rapid growth of distributed processing and the
Internet changed the telephony world. Internet congestion overloaded PSTN circuits,
and carriers were forced to invest in additional PSTN capacity an expensive and
cumbersome task. The characteristics and bandwidth demands of data transmission
were not suited for the circuit-switched PSTN. A packet-switched network
accommodates the rapid growth and bandwidth requirements of data traffic more
efficiently than the circuit-switched architecture. As carriers develop a packet-based
infrastructure to support the increasingly data-centric traffic, the next logical step is to
carry voice traffic on that same network. The convergence of voice and data
networks enables the delivery of advanced, revenue generating services, which were
not feasible in the circuit-switched environment. It is these services that will create
the sustainable revenue stream in the next-generation network.

Network signaling is critical to the delivery of services in converged networks.

Today’s standard signaling technology, Signaling System 7 (SS7), allows PSTN
network nodes to communicate directly with one another and to share the information
needed to process any type of call autonomously. SS7 is a reliable, self-healing
network architecture and protocol that manages voice circuit functions on a separate,
fully redundant packet-based network. It is widely deployed in both wire line and
wireless networks worldwide. In addition to managing call set up and tear down, SS7
enables services such as toll free, and toll wire line services, and local number
portability (LNP). Enhanced call features - like call forwarding, calling name delivery,
and three-way calling, as well as business systems, including customer care and
billing, are all enabled by SS7 signaling. Likewise, next-generation services such as
Internet call waiting, prepaid calling, calling party pays, Internet roaming, and wireless
web browsing requires the support of SS7 signaling. Today’s converged network
combines voice services with packet networks, using signaling as the underlying
technology to provide the independent control network that connects the two. This
common signaling architecture acts as a bridge that offers service providers and
carriers the best of both worlds the existing services and reliability of the circuit-
switched network coupled with the speed and innovative services of the packet-
switched network.

Soft Switched-based Applications

• Internet offload • IP Centrex
• Packet tandem • PBX long distance access
• Toll bypass for long-distance and international calls • IP VPN
• Packet-based local calling service and features • Wireless tandem

The convergence of voice and data networks is today’s reality. It requires the
signaling technology that bridges the two networks. Using the converged network,
service providers and carriers are bundling new services and applications into
5
competitive solutions that are revolutionizing the telecommunications marketplace.
Network architecture will evolve and become more sophisticated as new features are
added; creating an environment that will radically alter the way people connect.
Users will have the ability to control how, when, and with whom they communicate.
The new generation of services will focus on personal identity, mobility, presence
management, and multimedia/multiparty communication.

Communication technologies must evolve to support the delivery of personalized,

multimedia services, anywhere – anytime. The new network model encompasses
multiple access technologies, media types, and carriers, which will broaden the scope
and sophistication of signaling requirements. The ability to mine the signaling data to
support business systems such as billing and fraud control will also be a requirement.
The new signaling network will preserve and build on fundamental attributes of the
PSTN, such as disaster recovery, load sharing, and distributed intelligence. These will
be coupled with the scalability, speed, and economy of the packet network, which is a
technology-independent, open-system paradigm. Packet telephony offers efficient
and flexible transport capability by taking advantage of dynamic bandwidth sharing,
and allows the quick provisioning of advanced features that increase end-user
productivity, expand subscriber mobility, and enhance interactive communications.
Network multimedia communications over packet-based networks require
standardized protocols for call control and media mapping. These protocols will
provide communication between media gateway controllers and enable media
gateway to media gateway media streaming. The two main standardization initiatives
include H.323 from the International Telecommunications Union (ITU) and Session
Initiation Protocol from the Internet Engineering Task Force (IETF).

H.323

Established in 1997, H.323 is an umbrella recommendation from the ITU that

encompasses a number of specifications that provide the means for tight control of
audio and video communication over a packet based network. It incorporates
signaling protocols such as Transmission Control Protocol (TCP)-based Q.931and
H.245 for call control, and registration admission status (RAS) for controlling user
access and usage of the network.

Session Initiation Protocol (SIP)

SIP, a newer standard designed by the IETF, is a text-based, application-layered

protocol that can be used to establish, modify, and terminate sessions in an IP
network. A session can be a simple two-way telephone call or a collaborative multi-
media conference. SIP supports real-time, multimedia sessions that seamlessly
integrate voice, data, and video over IP. It makes a host of innovative services
possible, including voice-enriched e-commerce, web page click-to-dial, instant
messaging with buddy lists, and IP Centrex services. SIP can be used by intelligent
end points, such as SIP phones, to participate in sessions, and also by network server
elements to exchange information. When operating in a stateless manner, SIP does
not keep track of the details of a session. It is a simple framework that scales, is
extensible, and sits comfortably in different architectures and deployment scenarios.
SIP borrows heavily from Internet protocols such as HTTP. With SIP, telephony
becomes another web application and integrates easily into other Internet services.
Both H.323 and SIP are designed to address the functions of signaling, which allows
call information to be carried across network boundaries. Both protocols are likely to
coexist in the same packet telephony network, and the signaling network should be
designed to support this interoperability.

The infrastructure of the new packet-based network will require core routing
intelligence. Two other IETF protocols, TRIP and ENUM, have been proposed to
6 augment SIP and H.323, providing advanced routing capabilities. Telephony Routing
Information Protocol, or TRIP, is a core protocol for dynamic routing of packet
telephony traffic. TRIP is designed to support the flexible nature of the packet
environment – it interworks with many different kinds of gateways in small or large
networks. TRIP communicates policies for call routing, providing the intelligence to
determine which paths will be used to route calls between packet networks and
multiple PSTN gateways. TRIP creates routing rules and determines optimal
telephony destinations, attributes, and call paths. With TRIP, the network can
automatically propagate all routing information among all routing servers.

ENUM, which stands for E164 number map, allows calls from the PSTN to be
routed to destinations in an IP network. This ability can be used to provide
communication solutions where telephone numbers are the only call identity. ENUM
is a directory service which allows the network to map an E164 standard telephone
number to a set of addresses, such as e-mail, SIP URLs for IP voice, mobile
telephone numbers, and web addresses. Routing can be further enhanced to account
for presence information, time of day, or other attributes. Emerging protocols and
new network architectures are developing to support changing technologies and
subscriber demand for new services. The standardization and adoption of new
signaling protocols, such as SIP and H.323, will make possible the kinds of integrated,
flexible, and innovative systems and applications that deliver the promise of
tomorrow’s network.

The Signaling Server

Signaling is a critical component of the new network model. It enables networks to

interact and exchange data to support the delivery of multimedia services. The engine
of the next-generation signaling network is the signaling server, providing a common-
transport, protocol-independent routing capability for signaling messages, which in this
network serves to control multimedia, multiparty sessions. In an IP network, the
signaling server is responsible for name/address translation, protocol interoperability,
mobility management, service discovery, call routing, and security between networks.
It interoperates with soft switches and access gateways to connect off-net calls to
and from the voice network. Signaling is the key to enabling transport across network
boundaries.

Signaling Server Functions

• SIP proxy server; SIP redirect server; • H.323 – SIP Interworking
SIP location server
• SIP-transaction capabilities application • Security
part (TCAP) mediation
• SIP-ISDN user part (ISUP) mediation • Firewall / NAT transversal
• H.323 Gateway/Gatekeeper

Network Planning Considerations

The coexistence of multiple technologies, the deployment requirements of new

network architectures, and the impact of protocol delays must all be taken into
consideration when planning the future network. The PSTN will remain robust for the
foreseeable future, therefore, the impact of new technologies on the PSTN must also
be considered. Network evolution and growth will borrow from the PSTN, using
these high standards as a baseline, incorporating redundancy for disaster recovery
and fault tolerance, switchover duration, and network healing. Additionally, service
providers must continue to upgrade software functionality without impacting
subscriber service. The new, open architecture network must support business
systems security, billing, and customer care. The integrity of these business systems
is a key component in enabling tomorrow’s network. 7
20.5 CONVERGENCE OF IT AND CONSUMER
ELECTRONICS: EMERGING TRENDS

Whenever the issue of convergence is discussed in the context of information

technology it is imperative to refer the convergence of information and
communication systems so that devices can be unified for different application
services. The third dimension of human needs, which occupies the sphere of modern
digital world with equal importance, is entertainment. The landmarks in history of the
developments in communication are telephone (1870s), radio (1890s) and television
(1930s) with increasing value addition for entertainment over information and
communication. The personal computer (1980s) evolved primarily to address the
information processing needs and it was the only device in the chain of revolutionary
products developed which was digital by birth. The fast development in digital
technologies paved the way of merger or hybridization of these different generation
devices promoting the preferences for single device to cater information processing,
communication and entertainment needs. This resulted in need driven efforts for
convergence of technologies with an eye to develop innovative consumer products
which can provide a common platform for handling different services and
applications. The mix of research & development of technologies and innovative
product development and design created a new paradigm to ever-increasing urge for
value-added products. This process of value addition is creating new dimensions to
existing products and setting newer trends for consumer preferences and needs well
supported by convergence of technologies.

It is evident that the convergence of technologies will continue to be an important

trend and the key to growth for various sectors within the broader technology arena.
The potential of new emerging technologies will play a key role in the development of
new markets for new systems and with new and innovative consumer electronic
products. The innovations are more rapidly seen in home networking, games, DVD
technologies, Blue tooth devices, digital imaging, digital entertainment platforms,
wireless technologies, and digital radio receivers.

One major aspect related to the above innovative technologies to develop seamless
wireless connections between small, multi-functional devices in the home. It is
believed that signal-processing technology is the choice for digital audio, video, cell
phones and broadband and wireless communications. To achieve this access to
broadband technology must be on top of priorities, in order to move forward on this
front focus on spectrum issues. This includes developing policies that promotes more
efficient sharing of spectrum. The expansion of broadband and high-speed wireless
networks is believed to be a key factor in the future proliferation of IT products to be
used by common people in daily life. It is expected that more content made available
over such networks and more engaging applications for the user will lead to the
development of larger commercial markets. Most of the advances in this direction
will lead to developments in consumer electronics products in which convergence of
different technologies and applications will come up as natural process.

The consumer electronics industry, in short, is entering a new era based on the
promise of utilizing broadband and wireless technologies to promote the more
widespread use of electronic devices. Advanced in microelectronics further enhances
the potential for consumer electronic devices to proliferate and be utilized well
beyond what is in the market today. The personal computer led to a revolution in
terms of how data could be managed and manipulated. The Internet enhanced this
function by providing direct access to more data. Mobile wireless and wideband
provides the consumer with all of the above in more places with greater access.
The trend is leading many markets that were traditionally separate on a competitive
8 collision course.
In an interesting development, the convergence trend is leading both hardware and
software companies to become both hardware and software companies. Microsoft
has unveiled its new Smart Personal Objects Technology (SPOT). Chips in the
devices pick up signals from a radio network built on the under-used FM spectrum. It
is part of the company’s strategy to produce a wide range of software for the new
devices of the future beyond a PC, as well as such common consumer electronics
products as watches, clocks, and even key chains. Microsoft has already developed
special software for Pocket and Tablet PCs (a derivative of laptops) in order to
participate in the wireless market. Clearly, this approach appears to be a copy of
what Sony and other Japanese electronics firms decided to do toward the beginning
of the 1990s. Sony sought to develop seamless networks of electronic devices for the
home connected through wireless systems. Sony is making serious efforts to establish
the Linux operating system as the global and open standard for transferring digital
entertainment from device to device in the home as the use of broadband expands. It
is believed that the PC may be useful in transmitting downloaded content to the TV,
or even TV could bypass the PC entirely and get its content from devices like Sony’s
proposed Cocoon set-top box, which has already been tested in Japan. Cocoon is a
Linux-based, Internet-connected set-top box with a hard-disk drive that can transfer
and play movies on devices connected to a home network.

Microsoft, along with Dell, Hewlett Packard, and Gateway, are interested in
expanding into the consumer electronics business. Microsoft, which also produces
products such as the Xbox, now likes to be called a consumer electronics
manufacturer. Companies in the increasingly commoditized PC business are seeking
to expand into consumer electronics by entering into product categories that
compliment to the PC via “gateways”, especially home entertainment devices. The
gateways can take the shape of a PC-centric system, a set-top box, or a handheld
computer containing special software that allows the user to control a variety of
devices throughout the home. It should be interesting to see future competition
between firms such as Microsoft that are developing proprietary standards for
networked electronic appliances versus firms such as Sony that support more open
standards. It is evident that firms that have specialized in producing electronic devices
for the rest of the world, especially those in Japan and Asia, may benefit greatly from
the aforementioned trends. Such a trend may provide an advantage to hardware
makers over software companies and those that excel at branding and the farming
out production to other firms.

New emerging technologies feature new, innovative products with a focus on the
convergence and consumer adoption of 3G, highlighting the growth potential after the
success of GSM. In developed countries wireless phone owners prefer converged
wireless phone/PDA devices to two stand-alone products capable of performing the
same functions. More advanced phones are made for more advanced networks.
Many advances in wireless technologies are seen for next-generation wireless
systems such as smart phones with high-definition screens, camera functionality and
those that double for PDAs. This has resulted due to better, faster networks being
setup and strong demand from consumers.

20.6 E-COMMERCE: ESSENTIAL COMPONENTS

AND FUTURE ISSUES

E-commerce is perhaps the most widely acclaimed buzzword, which gained

popularity even aftermath of so-called dot com boom and diffusion. Every business
aspect was being viewed with identifying business opportunities with the active
support of IT tools especially Internet. Though various business models evolved and
still the process of finding the most suitable model for different business propositions
9
is continuing, the impact of e commerce practices can be felt and acknowledged
without any reservations. However this impact is varied across different nations due
to their characteristic differences in economies. The trends in e commerce practices
show that it will gain the requisite volume with the pace of IT revolution as seen
across the world.

This section provides a brief description of modern practices and emerging trends
related to technology, design and security issues involved in e-commerce.

Wireless Internet

Major technology and business companies such as Microsoft, AOL and Amazon.com
are in the lead in developing and marketing wireless communications services and
products required for facilitating business through wireless internet. AOL wants to
make instant messaging available to all its customers and Amazon is already selling
books using palm pilots. WAP (wireless application protocol) will be developed for
use for wireless pages, instead of HTML.

Portals

Portals are sites that combine a portfolio of basic content, communication, and
commerce sites. For the most part, they started out as search engines. There are two
different types of portals in use, broad-based portals i.e. sites that serve everyone.
They include Yahoo!, AOL, MSN, Excite, Snap, Lycos, AltaVista, Look Smart,
About.com, Juno, Earthlink, etc. Vertical portals are the sites that focus on a
particular content category, commerce opportunity, or audience segment, with a broad
set of services. Examples of such portals include CBS Sports line, Garden.com, eBay,
Amazon.com, Blue Mountain Arts, CNET, etc.

Smart Cards

A smart card is basically a credit card with a built-in microprocessor and memory
used for identification or financial transactions. When inserted into a reader, it
transfers data to and from a central computer. It is more secure than a magnetic
stripe card and can be programmed to self-destruct if the wrong password is entered
too many times. As a financial transaction card, it can be loaded with digital money
and used like a travelers check, except that variable amounts of money can be spent
until the balance is zero.

Digital Signatures - Future Trends

The future trends in digital signatures will depend on the proper and responsible use
of the technology. Even though digital signatures are remarkably secure, there is a
growing concern that the keys might be stolen from the owners and they could be
used fraudulently e.g. when a key stored in a system is accessed by a service agent
there is very good chance that the key might be used for advantage of many
outsiders. And in the future though digital signatures are set to embrace the corporate
world, it is of low importance to the customer, as he is very unlikely to purchase his
home, car, etc., online. However this technology can very widely be used in many
other small-scale transactions online. In the near future many software applications
will support the concept of digital signatures. Already Adobe Acrobat supports a
feature called Self-Sign, a plug-in that can be used for signing and validating. Apart
from this Verisign, Entrust and many other companies have unveiled their packages
that go hand in hand with applications like Adobe Acrobat and MS Word. So this
technology will surely be commonly used in the future, though it might take some time
before it has been accepted as a standard.

10
20.7 E-COMMERCE DESIGN ISSUES

As the website of the business organization offering e commerce services are their
front offices and showcases for their customers, a good design can make a web site
stand out among dozens of competing sites selling similar products. A well-thought-
out presentation can boost traffic and sales. The best-designed sites keep customers
coming back. Simplicity seems to be the best strategy in web design for e-commerce.
E Commerce managers and web-design staff must ensure that it’s easy for users to
download a page, find an item, make a purchase, and navigate through page after
page without losing track of the starting point. Navigation is seen as the key; the first
step to building a simple yet effective e-commerce site.

Web Standards

The web standards are very much in demand to consolidate the momentum to enable
the web accessible by everyone by establishing standards, like structural languages
(html, xml), presentation languages (css, xsl), object models (dom), scripting
languages (javascript). Recreation of brick-and-mortar feel is one of the main
concern for the retailers who are moving from brick-and-mortar to online sales, and
always need to consider how they are going to transfer the “feel” of their store to the
internet. It is observed that users look straight at the content and ignore the navigation
areas when they scan a new page. It is suggested that navigation elements should be
removed from websites and replaced with content, which is what users are really
looking for.

Virtual Shopping

The biggest hurdle in online shopping faced by the customers is lack of opportunity to
physically verify the suitability of the product for his or her needs. In some category
of products it becomes almost impossible to make a decision based on the passive
display of product. Innovations in these directions are aimed to remove this hurdle
and some of the sites have shown a path to resolve this problem. For example
boo.com, an international fashion and sports store allows customers to “try on”
clothes and see them from all angles in 3D The boo.com also offers miss boo, a
“virtual personal shopper and futuristic fashion guru”, who will help you with any
question you have about products or services offered. Similarly landsend.com
provides a virtual model, which can be configured to the same body type, hair color/
style, and skin tone as the customer. A very interactive shopping experience is
enabled by iMedium, a company that developed See! Commerce technology with
products See! Catalog and See! Mail. These technologies, are direct response
applications that allow merchants and retailers to offer their customers an interactive
shopping experience based upon scenes, photos or pictures that contain embedded,
contextual advertising and merchandising links. The approaches that allow customers
to see the products in real time before they purchase are starting to be used to
enhance shopping experience. Gallery Furniture Inc. and FAO Schwarz are two of
the companies using this technology.

Catering websites to customers’ preferences increases the depth of knowledge about

customers, reduces customer-acquisition costs, and builds brand loyalty. This is
known as site personalization. Personalization means presenting the site visitor with
specific information based on his or her identity or behavior; it is all about making the
content more relevant for the user. The tools for personalization include click stream
tools, which watches the pages that the visitor browses and keeps track of time
spent. Thus they know where the customer has been on the site. Others tools such as
collaborative filtering tools examine data based on explicit preferences, and statistics
about likely purchases come from the patterns shared with similar users in the
database. 11
Rules-based systems build user profiles and incorporate business rules driven by the
site owner (i.e. rule can instruct server to show the site in French if the visitor comes
from a French domain) and also barriers which include price and privacy concerns.

Live customer service companies are responding to customers’ requests for

customer service throughout 24hours 7 days a week. One of the ways by which they
have done this is to create a virtual assistant, like Jill at cozone.com. Jill asks
questions like a real person would ask, and as a result, gets email from satisfied
customers. However, sometimes customers want to talk to a real person, and it is
possible now with LivePerson, Inc. E businesses are realizing that customer service
is the bottom line when it comes to how successful they will be.

20.8 PRIVACY IN THE CONTEXT OF

E-COMMERCE

One of the most controversial topics in e-commerce today is the privacy of

customers. The most common apprehensions are like, what are they doing with our
information? Why do they want it? What will they do to our so-called private lives? In
order for businesses to build lasting and fulfilling relationships with customers, they
need to know as much about them as possible. However, as all of us are aware, this
information is being used for purposes other than to serve us. The big question for e
businesses is how to collect their customers’ information yet still maintain their trust.
This will be an issue for some time to come. E businesses will have to learn to
balance personalization with privacy issues. Companies must only gather and use
data that will help their customers complete the business on their website. However,
the reality is that information is routinely being sold and used for purposes other than
the reason the information was originally gathered. So what are the organizations’
responsibilities?

Personalization on the Web takes two basic forms: collaborative filtering and profiling.
Both are the attempts to collect specific information that will be valuable to
generating additional traffic, click-troughs, and revenue on Web sites. Collaborative
filtering is voluntary. It takes information provided by the user and predicts what
information will be of interest to him or her. It can also compare a user profile with
those of other users to create common-interest groups and make recommendations
based on other customer preferences. In profiling, a visitor’s actions are observed
and gathered through the use of a cookie, a unique identifier for that customer.
Subsequent user clicks identify patterns of behavior and interests, which result in the
presentation of specific information to Web sites visited. There is also the ability to
allow the collection of information on an individual’s cookie across multiple sites.

Open Source Model for Customer Data

CPEX (customer profile exchange) is a new standard for how customer information
is gathered and used. The standard is being developed by a group of large companies,
including Compaq and oracle.

Customer Service Issues

Bad customer service had a negative effect on e Businesses. Technical difficulties

with shopping carts, failure of customer service representatives to respond to
inquiries and frustrations about returning items are among the issues that customers
often complain about.

12
Standard for e-commerce

A need for a standard in e-commerce has been recognized and the standard for
Internet commerce was developed by global information infrastructure (GII) in
association with Ziff Davis. The Commerce Standard is a codification of best
practices in Internet commerce developed by a community of world-leading thinkers
and practitioners; it specifies the merchant practices and policies that lead to high
levels of customer satisfaction, service, security and privacy. The Standard for
Internet Commerce meets five primary needs. Together these five needs make it
crucial that the Commerce Standard is developed and implemented at this time. The
Standard for Internet Commerce is needed:

1) To increase consumer satisfaction and confidence in doing business on the

Internet by merchants and customers as a way to establish merchant credibility
and trustworthiness,

2) To help merchants provide a world-class customer experience, innovate rapidly

and lower their costs,

3) To support and enhance self-regulation of Internet commerce, and

4) To help merchants and customers deal with a proliferation of guidelines and

symbols.

20.9 SUMMARY

Multimedia, wireless networks, convergences define the new focus of ICT. Today’s
converged network combines voice services with packet networks, using signaling as
the underlying technology to provide the independent control network that connects
the two. Whenever the issue of convergence is discussed in the context of
information technology it is essential to refer the convergence of information and
communication systems so that devices can be unified for different application
services.

Emerging protocols and new network architectures are developing to support

changing technologies and subscriber demand for new services. Major technology
and business companies such as Microsoft, AOL and Amazon.com are in the lead in
developing and marketing wireless communications services and products required
for facilitating business through wireless internet. The ICTs provide an opportunity for
addressing productivity advances in nations, which would allow a substantial
expansion of industrial output.

This unit has highlighted the competitiveness of information and communication

technology (ICT) with respect to modern business practices. It described the
technology issues involved in convergence with respect to software and hardware
requirements and trends. It highlighted the emerging trends that has arisen due to
convergence of IT and consumer electronics. The unit also described modern
practices and emerging trends related to technology, design and security issues
involved in e-commerce.

13
20.10 UNIT END EXERCISES
1) It is said, “Information and communication are most of the time complementary
and sometimes supplementary to each other”. Elaborate!
2) What do you understand by competitiveness of ICT? Highlight the impact of
ICT for the developing nations with respect to the economic activities.
3) What are the hardware and software issues for the technology for
convergence? Also explain what do you understand by soft switched-based
applications?
4) What are the standardized protocols for call control and media mapping in
network multimedia communications over packet-based networks? Describe
them!
5) Write a detailed note on emerging trends in convergence of it and consumer
electronics.
6) Briefly describe the modern practices and emerging trends related to
technology, design and security issues involved in e-commerce.

20.11 REFERENCES AND SUGGESTED FURTHER

READINGS

David B. Yoffie, Competing in the Age of Digital Convergence,

Harvard Business School Press; (1997)

Dorothy E. Leidner, Robert D. Galliers, D. E. Leidner, Strategic Information

Management: Challenges and Strategies in Managing Information Systems,
Third Edition, Butterworth-Heinemann; (2003)

John Ward, Joe Peppard, Strategic Planning for Information Systems,

John Wiley & Sons; Third edition (2002)

Steven Shepard, Telecom Convergence: How to Profit from the Convergence of

Technologies, Services, and Companies, McGraw-Hill Professional Publishing;
2nd Edition (2002).

14
MS-07

Management Programme

ASSIGNMENT
SECOND SEMESTER
2018

MS-07: Information Systems for Managers

School of Management Studies

INDIRA GANDHI NATIONAL OPEN UNIVERSITY
MAIDAN GARHI, NEW DELHI – 110 068
ASSIGNMENT

Course Code : MS - 07
Course Title : Information Systems for Managers
Assignment Code : MS-07/TMA/SEM - II/2018
Coverage : All Blocks

Note : Attempt all the questions and submit this assignment on or before 31st October, 2018 to
the coordinator of your study centre.

1. How do technological advances affect the spread and use of the Internet? What industries
should pay close attention to efforts to regulate the Internet?

2. Describe the role of functional information systems. Also, discuss the managerial and
strategic applications in the Accounting and Finance area or Human Resources
Management areas that are supported by IT.

3. Is information technology as vital to modern global business as money? Why or why not?
Describe the capabilities expected of information systems in modern organizations.

4. Define data mining and list some of its typical characteristics. Discuss some ethical issues
related to data mining.

5. What are the major benefits of neural networks? Discuss some recent popular
applications of Artificial Neural Networks (ANNs).

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Networking Technologies

UNIT 1 INFORMATION TECHNOLOGY:

Information Technology (IT) has become a strategic necessity. Unless we believe in

Information Technology has become a major facilitator of business activities. It is also

As far as history of computing is concerned, people tried to invent a computing

1.4 TYPES OF INFORMATION SYSTEM

There are various types of information systems as listed below.

Transaction Processing Systems (TPS)

Executive Information System (EIS)

Management Information Systems (MIS)

Work Flow System

Enterprise Resource Planning (ERP)

An expert system has an extensive knowledge base.

Internet has facilitated development of workflow systems across networks. As we

The Internet is extremely robust. A system or a network can be added / deleted to

1.7 COMPUTER AIDED DECISION MAKING

An information system that helps a manager in making a decision is called a

1. Define an information system and list its major components.

1.10 REFERENCES AND SUGGESTED FURTHER

Lauden, K. C. and Lauden, J. P., (2002) Management Information Systems-

2.3 COMPONENTS OF A COMPUTER

Fig. 2.1 : Components of a Computer 1

2.4 CENTRAL PROCESSING UNIT (CPU)

A program is a sequence of instructions. An instruction may be an arithmetic

2.5 STORAGE AND STORAGE DEVICES

1) Volatile Storage: Information residing in such storage needs continuous power

Megabyte MB 1,024 * 1,024 (about one million)

Gigabyte GB 1,024 * 1,024 * 1,024

Terabyte TB 1,024 * 1,024 * 1,024 * 1,024

Types of Main Memory

SDRAM DRAM EPROM PROM

Fig. 2.2: Types of Memory

RAID (Redundant Array of Independent Disks) is an array of multiple inexpensive

2.6 INPUT/ OUTPUT DEVICES

Category Name of Device

2.7 NETWORKING AND NETWORKING DEVICES

Tree Structure Bus Structure

Fig. 2.3: Types of Network Topologies

2.8 PLUG AND PLAY DEVICES

Fig. 2.4: Universal Serial Bus (USB)

There are two types of USB connectors

1) The Type A connector (below) is used to connect a USB device to a hub or

2) The Type B connector (below) is used to attach a USB cable to an endpoint

Fig. 2.5: Types of Universal Serial Bus (USB) connectors

Table 2.3: Main characteristics of mediums

Medium Advantages Disadvantages

• Inexpensive • Low Bandwidth

• Higher Bandwidth • Expensive and Inflexible

• High Bandwidth • Expensive

Microwave • Very High Bandwidth • Uses Encryption for security

• Very High Bandwidth • Expensive

There are two modes of communication – Synchronous and Asynchronous. In

2.10 TYPES OF COMPUTERS

Mainframes: Mainframes are not as powerful and not as expensive as super

Workstations: A workstation is usually based RISC architecture, provides high

Microcomputer: Microcomputers, also called personal computers, are general-

Network Computer: A network computer (NC) is a desktop terminal that is

In this unit, we have discussed an introduction to computer systems. The components

1) What are the components of a computer system?

2.13 REFERENCES AND SUGGESTED FURTHER

Fitzherald, J.and Dennnis A, Business Data Communications and Networking;

Laudon C K & Laudon J P, Management Information Systems, Pearson Education,

Turban, T., Ephraim, M. and Wetherbe J., Information Technology for

Software may be distributed on floppy disks, CD-ROMs, and on the Internet. It is

3.3.1 Operating Systems

In some specialized or embedded computers the operating instructions are contained

The purpose of memory management is to control how memory is accessed and to

Memory management is important because memory can be divided into different

Managing all processing activities is accomplished by the task management features

The ability of a computer to handle an increasing number of concurrent users

3.3.2 Language Translators

Assemblers: The computer software that translates the assembly language

Fig. 3.1 : Working of Interpreter

Difference between Compiler and Interpreter

Step 1 : Program Execution:

Step 2 : Program Execution: