Unit 1.

Foundation of Information System

Introduction to information system
“An information system is a set of interrelated components that work together to collect,
process, store, and breakdown the information to support decision making.”
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“Information systems are combinations of hardware, software, and telecommunications
networks that people build and use to collect, create, and distribute useful data, typically
in organizational settings."
How Does Information System Work?

Working of information System

 Input: First the system collects data as input. This data can come from the typing,
voice commands, touch screens, and sensors. The input data can be structured
(organized) and unstructured (disorganized).
 Processing: Since the input data is raw the computers processor (CPU) has to
organize it into the structured format. It does this through steps like the sorting,
grouping, searching, analyzing, and making the reports.
 Storage: Next the organized data is stored temporarily or permanently. It gets
stored in databases, hard drives, or solid-state drives.
 Output: The stored data is then analyzed and presented in a useful way like
reports, dashboards, or data visualizations.
 Feedback: Finally, the system gets feedback from users on their experience. This
helps measure how well the system is working.
Benefits of MIS
 Allows company management access to a single database to manage all transactions
and planning processes.
 It saves time and increases work effectiveness considerably.
 Ensures improved data analysis and decision-making.
 Maintains an accurate record of the system’s inputs and outputs and tracks employee
performance.
 Critically analyze a company’s and its employee’s strengths and weaknesses.
Role of Information Systems in Business
1. Support for Business Processes and Operations
Information systems are fundamental to the seamless execution of daily business
operations. They automate and manage a wide array of business processes, including but
not limited to inventory management, customer relations, and payroll. By simplifying and
streamlining these activities, IS significantly reduce operational costs and enhance both
efficiency and productivity across the board. The automation of routine tasks frees up
human resources, allowing them to focus on more strategic activities that add value to
the business.
2. Support for Business Decision Making
In today's data-driven landscape, the ability to make well-informed decisions swiftly is
crucial for business success. Information systems provide a robust framework for the
collection, processing, and analysis of data, converting raw data into actionable insights.
These insights empower managers and business leaders to make informed decisions,
accurately forecast future trends, and devise effective strategies. The analytical capabilities
of IS, therefore, are invaluable in navigating the complexities of the market and
maintaining a competitive edge.
3. Support for Strategic Competitive Advantages
The competitive advantage of a business often hinges on its agility, responsiveness, and
innovation. Information systems are key enablers in this regard, offering tools to identify
new market opportunities, enhance customer service, and foster the creation of innovative
products or services. Moreover, IS facilitate the optimization of supply chains, ensuring
that businesses can respond swiftly to changes in market dynamics. Through the strategic
use of IS, businesses can position themselves ahead of competitors, adapting quickly to
new challenges and seizing opportunities as they arise.

Components of Information Systems

1. Computer Hardware
Hardware refers to the physical components of an information system that are used for
the input, output, processing, and storage of data. This includes: computers, input devices,
output devices and storage devices.
2. Software
Software consists of the programs and applications that instruct the hardware on how to
process data. It is used for analyzing and processing of the data. These programs include
a set of instruction used for processing information.
3. Database
A database is a structured collection of data that allows for the efficient retrieval, insertion,
and deletion of data. It serves as the central repository for storing and managing data
within an information system.
4. Network
Networks connect the various hardware components and enable them to communicate
with each other, both within and outside the organization. Networks consists of both the
physical devices such as networks cards, routers, hubs and cables and software such as
operating systems, web servers, data servers and application servers. These resources
facilitate the flow of information in the organization
5. Human Resource
It is associated with the manpower required to run and manage the system. People are
an essential component of an information system and include: end users, IT
professionals and management.

Types of Information Systems

The key types of information systems are:
1. Transaction processing systems
Transaction Processing Systems (TPS) are the basic business systems designed to handle
day-to-day business operations, such as processing orders, handling payments, and
managing inventory. TPS are essential to the operation of any business, large or small.
They help businesses to ensure that their daily operations run smoothly, efficiently, and
accurately. Example: Point-of-sale systems, inventory management systems, and payroll
systems.
2. Management Information System (MIS):
Management Information System is designed to take relatively raw data available
through a Transaction Processing System and convert them into a summarized and
aggregated form for the manager, usually in a report format. Examples: Sales reports,
budget analysis tools, and performance dashboards.
3. Decision Support System (DSS):
Decision Support Systems (DSS) are designed to help managers make complex decisions
by providing them with analytical tools to gain insights into complex business problems.
DSS can analyze large amounts of data to identify trends and patterns for predicting
different potential outcomes based on different scenarios. Examples: Forecasting models,
Bank loan managements systems, what-if-analysis tools etc.
4. Experts System:
Experts systems include expertise in order to aid managers in diagnosing problems or
in problem-solving. These systems are based on the principles of artificial intelligence
research. Experts Systems is a knowledge-based information system. It uses its
knowledge about a specify are to act as an expert consultant to users.
5. Executive Support Systems (ESS)
Executive Support Systems (ESS) is another important Types of Information Systems,
which is designed to assist senior management in strategic decision-making processes.
Tailored to the needs of high-level executives, it provides comprehensive information
from internal and external sources, enabling leaders to analyze trends, assess
organizational performance, and formulate long-term strategies.
6. Office Automation Systems (OAS)
Office Automation Systems also known as office information systems, are built upon
computer-based information systems and designed to improve the productivity of data
workers by automating the management of documents, scheduling meetings, and
communication. Examples: Microsoft office suite, Email etc.

Effectiveness and efficiency criteria in information system

The performance of the system can be measured by two factors: the efficiency and the
effectiveness.

Effectiveness refers to the degree to which an information system achieves its intended
goals or objectives. It focuses on the quality of outcomes produced by the system in
relation to the organization's needs.
Key Criteria of effectiveness:
 Accuracy: The system provides correct and reliable data.
 Relevance: The information produced is pertinent to the users and their needs.
 Timeliness: The system delivers information at the right time for decision-making.
 Completeness: The system captures all necessary data and generates comprehensive
reports.
 User satisfaction: The system meets the expectations and needs of its users.

Efficiency, on the other hand, refers to the resource utilization of the information system.
It measures how well the system achieves its goals with the least amount of resources—
such as time, money, hardware, software, and human effort—required to produce the
desired output. An efficient system is one that minimizes waste and uses resources
effectively.
Key Criteria of efficiency:
 Speed: The system processes and retrieves information quickly.
 Cost-effectiveness: The system operates within the budget, and its benefits justify the
costs incurred.
 Resource utilization: The system maximizes the use of available resources (e.g.,
hardware, bandwidth, storage).
 Optimization: The system minimizes delays, errors, and redundant processes.