SYLLABUS

Course Title : Information Systems for Managers

Course Code : MSPS 15

Course Credit: 3
Course Objective :
CO 1. Create conceptual understanding Information system and its strategic uses in
an organization
CO 2. State out the fundamental principles of computer system, techniques to
monitor the database and the procedure for office communications
CO 3. Examine the application of information system, decision and expert support
system
CO 4. Describe the planning and development of information system and alternative
approaches for system development
CO 5. Paraphrase ethical challenges and the risk involved in information technology

BLOCK 1 Information System

Information system: Managers’ view – Concepts of systems and Organizations –
Strategic uses of Information Technology.

BLOCK 2 Computer System Recourses

Computer System Resources: Computer Hardware and Computer Software – File
and DBMS – Distributed System – Internet and Office Communications.

BLOCK 3 Applications of Information System

Application of Information System to functional Business Areas: Operational
Information System – Tactical and Strategic Information System – Decision support
system and expert system.

BLOCK 4 Planning & Development

Planning and development of Information system: Information system planning –
System Analysis and design – Alternative application development approaches.
BLOCK 5 Security and Ethical Challenges
Security and Ethical Challenges: IS controls - facility control and procedural control -
Risks to online operations - Denial of service, spoofing - Ethics for IS professional -
Societal challenges of Information technology.

References:
1. Arpita Gopal, (2009), MIS for Strategic Business Processes, latest Edition,
McGraw Hill Education, India
2. Brien, Marakas, Behl,( 2017), Management Information Systems, latest Edition,
TMH, India
3. Goyal .D P (2010), Management Information Systems–Managerial
Perspective, 3rd Edition MacMillan, Chennai
4. Gupta A K, Sharma, (2012), Management of Systems, latest Edition,
Macmillan, Chennai
5. Jawadekar, (2012), MIS Text and Cases, latest Edition, TMH, India
6. Joseph P T,( 2012), E-Commerce, an Indian Perspective, PHI, India
7. Laudon & Laudon, (2018) Management Information Systems, latest Edition,
Pearson, India
8. Milind M Oka (2012), “Cases in Management Information system , latest
Edition, ‘Everest Publication, India
9. Murthy,( 2013), Management Information System, latest Edition Himalaya,
Publication, India
10. Nina Godbole & Sunit Belapure (2012), “ Cyber Security” latest Edition, Wiley
India
11. Nirmala Bagchi, (2012), Management Information Systems, latest Edition,
Vikas Publication, India
12. Sandra Senf (2016), Information Technology Control and Audit, 4 th edition,
Auerbach Publications, Florida.
13. https://openstax.org/books/introduction-business/pages/13-3-management-
information-systems
14. https://nptel.ac.in/courses/106105175
15. https://smallbusiness.chron.com/management-information-system-2104.html
16. https://www.simplilearn.com/types-of-information-systems-and-applications-
article
Course Outcome :
CLO 1. Comprehend management and uses of information System for the making
managerial decisions.
CLO 2. Review the application of DBMS and Office Communications.
CLO 3. Acquire a real-world application of Information systems and Decision
Support System in a business
CLO 4. Recognize the planning and development of IT and its alternative
approaches
CLO 5. Outline the role of the ethical, social, and security challenges of
information systems.
 CONTENT

BLOCK 1 INFORMATION SYSTEM

UNIT 1 INTRODUCTION TO INFORMATION SYSTEM 2

1.1 Introduction 3

1.2 Why Information Systems? 4

1.3 Objectives of Information Systems 7

UNIT 2 INTRODUCTIONS TO MANAGEMENT INFORMATION 12

SYSTEM

2.1 Introductions 13

2.2 Emergence of Management Information Systems 13

2.3 Definition of Management Information Systems 15

2.4 Elements of Management Information Systems 16

Scope of Management Information Systems
2.5 17

UNIT 3 CONCEPTS OF SYSTEM AND ORGANIZATIONS 25

3.1 Organization 26

3.2 Types of Organization 27

3.3 Benefits of Organization 28

3.4 Information flow in an organization 29

UNIT4 STRATEGIC USES OF INFORMATION TECHNOLOGY 34

4.1 Strategic Uses of Information Technology 35

4.2 Modern Information Systems in Organization 36

4.3 Knowledge Work and Office Automation Systems 39

4.4 Management Information System 39

4.5 Systems Concept 40

 4.6 Sales and Marketing Systems 42

4.7 Manufacturing and Production Systems 43

4.8 Finance and Accounting Systems 44

4.9 Human Resources Systems 45

BLOCK 2 COMPUTER SYSTEM RECOURSES

UNIT 5 COMPUTER HARDWARE 51

5.1 Computer Hardware 52

5.2 Classifications of Computers 58

5.3 Hardware Technology Requirements for Electronic 59

Commerce and the Digital Firm

UNIT 6 COMPUTER SOFTWARE 63

6.1 Evolution of Computer Software 63

6.2 Classification of Computer Software 67

UNIT 7 DBMS 76

7.1 Database Concepts 76

7.2 Database Models 79

UNIT 8 DISTRIBUTED SYSTEMS 87

8.1 Distributed Systems 88

8.2 Internet 93

BLOCK 3 APPLICATIONS OF INFORMATION SYSTEM

UNIT 9 APPLICATIONS OF INFORMATION SYSTEMS TO 101

BUSINESS PART-1

9.1 Marketing and Sales 102

9.2 Procurement 105

 9.3 Warehousing 109

UNIT 10 APPLICATIONS OF INFORMATION SYSTEM TO 114

BUSINESS PART-2

10.1 Production 115

10.2 Finance 122

10.3 Human Resources 125

10.4 Tactical and Strategic Information System 126

10.5 Decision Support System 127

10.6 Executive Support System 128

PLANNING& DEVELOPMENT OF INFORMATION
BLOCK 4
SYSTEM

UNIT 11 PLANNING OF INFORMATION SYSTEM 134

11.1 Information System Planning 134

11.2 Challenges in Information Systems Planning 136

UNIT 12 DEVELOPMENT OF INFORMATION SYSTEM 141

12.1 Need for System Analysis and Design 141

12.2 Procedure of Analyzing Existing System 143

12.3 Steps in System Analysis and Design 145

12.4 Computer System Design 147

12.5 Data Specifications 149

UNIT 13 OVERVIEW OF ALTERNATIVE APPLICATION 154

13.1 Traditional System Lifecycle 154

13.2 Prototyping 156

UNIT 14 ALTERNATIVE APPLICATION DEVELOPMENT 162

APPROACH
 16.1 Application Software Package 162

16.2 End-User Development 163

16.3 Outsourcing 165

BLOCK 5 SECURITY AND ETHICAL CHALLENGES

UNIT 15 SECURITY AND ETHICAL CHALLENGES 171

15.1 Security and Ethical Challenges 171

15.2 IS Control: Facility Control & Procedural Control 173

15.3 Application Reliability and Data Entry Controls 174

15.4 Types of Spoofing 180

UNIT 16 SOCIETAL CHALLENGES OF INFORMATION SYSTEM 184

16.1 Ethics For Is Professional 184

16.2 Societal Challenges of Information System 188

16.3 Ethical Analysis 190

Plagiarism Report 193

 BLOCK 1

INFORMATION SYSTEM

Unit 1: Introduction to Information System

Unit 2: Introduction to Management Information System

Unit 3: Concepts of System and Organisation

Unit 4: Strategic Uses of Information Technology

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Unit 1

INTRODUCTION TO INFORMATION
SYSTEM
STRUCTURE

Overview

Learning Objectives

1.1 Introduction

1.2 Why Information Systems?

1.3 Objectives of Information Systems

Let Us Sum Up

Check Your Progress

Glossary

Suggested Readings
Answers to check your progress

OVERVIEW
An information system is a set of interrelated components that collect,
manipulate, and disseminate data and information and provide a
feedback mechanism to meet an objective. We all interact daily with
information systems, both personally and professionally. An information
system will support the decision making and control in an organization.
In addition to supporting decision making it also helps in coordinating
and controlling the organization. The information system may also help
managers and workers in analyzing the problems, visualizing the
complex subjects and it helps to create new products.
Information systems contain information about significant people, places
and things within the organization or in the environment surrounding it.
By information we mean data that have been shaped into a form that is
meaningful and useful to human beings. Data, in contrast, are streams
of raw facts representing events occurring in organizations or the
physical environment before they have been organized and arranged
into a form that people can understand and use.
Brief example contrasting information to data may prove useful.
Supermarket checkout counters ring up millions pieces of data, such as
product identification numbers or the cost of each item sold. Such pieces

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of data can be totaled and analyzed to provide meaningful information
such as the total number of bottles of dish, detergent sold at a particular
store, which brands of dish detergent where selling the most rapidly at
that store or sales territory, or the total amount spent on that brand of
dish detergent at that store or sales region.
Three activities in an information system produce the information. One is
Input – it captures or collects raw data from within the organization or
from its external environment. Second is processing - converts the raw
data into meaningful information. Third is output – transfers the
processed information to the people who will use it or to the activities for
which it will be used. Information system also require feedback, which is
output that is returned to appropriate members of the organization, to
help them evaluate or correct the input stage.

LEARNING OBJECTIVES

After reading this unit, you should be able to,

• define IS and the importance of IS and its mergence in the global
economy
• explain the role of information systems in today’s competitive
business environment.

1.1 INTRODUCTION
“The good old days – when programmers and management did’nt
interface with information system – are gone. Now all projects, even
those involving changes to existing systems, are reviewed by a steering
committee made up mostly of managers. To top it off, they are not even
the managers who will use the systems they approve. Rather, they are
senior managers – planners and strategists, not the ones who are
actually on the manufacturing floor or in the warehouse.”
The lifeblood of any organization is the flow of intelligence, information
and data. This “plasma” moves along channels from point to point
through the interrelated network of the operating elements of the
organization. It is important to recognize that a tremendous number of
these pieces of information, these bits of data, are generated almost
every minute of every day in the interaction of an organization with its
environment. Every activity in every organization contributes to the
generation of the information system.

What is an information system?

An information system can be defined technically as a set of interrelated
components that collect (or retrieve), process, store, and distribute

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information to support decision making and control in an organization. In
addition to supporting decision making, coordination, and control,
information systems may also help managers and workers analyze
problems, visualize complex subjects, and create new products.

Figure 1.1: Components of Information system

1.2 WHY INFORMATION SYSTEMS?
Until the 1980’s, there was little need for this Discipline or course.
Managers generally did not need to know about how information was
collected, processed, and distributed in their organizations, and the
technology involved was minimal. Information itself was not considered
an important asset for the firm. The management process was
considered a face-to-face, personal art and not a far-flung, global
coordination process. But today few managers can afford to ignore how
information is handled by their organization.
Three powerful worldwide changes have altered the environment of
business. The first change is the emergence and strengthening of the
global economy. The second change is the transformation of industrial
economies and societies into knowledge - based economy. The third
change is the transformation of the business enterprise. These changes
in the business environment and climate, pose a number of new
challenges to business-to-business firms and their management.

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Functions of Information System

Figure 1.2: Functions of an Information System

Emergence of the Global Economy

Globalization of the world’s industrial economies greatly enhances the
value of information to the firm and offers new opportunities to business.
Today, information systems provide the communication and analytic
power that firms need for conducting trade and managing business on a
global scale. To coordinate its worldwide network of distributors,
companies like Nu Skin had to develop global information systems that
can track orders, deliveries and payment, communicate with distributors
and suppliers, operate 24 hours a day in different national environments
and service local as well as international management reporting needs.
In short, controlling the far-flung global corporation is a major business
challenge that requires powerful information system responses.
Globalization and information technology are new threats to domestic
business firms; because of global communication and management
systems, customers now can shop in a worldwide marketplace,
obtaining price and quality in forces firms to play in open, unprotected
worldwide markets, firms need powerful information and communication
systems.
Transformation of Industrial Economies in to Knowledge Based
Economy
The knowledge and information revolution began at the turn of the
twentieth century and has gradually accelerated. By 1976 the number of
white-collar workers employed in offices surpassed the number of farm
workers, service workers and blue-collar workers employed in
manufacturing. Today most people no longer work in farms or factories
but instead are found in sales, education, health care, banks, insurance

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firms and law firms; they also provide business services like copying,
computer software or deliveries. Because the productivity of employees
will depend on the quality of the systems serving them, management
decisions about information technology are critically important to the
prosperity and survival of a firm. Consider also that the growing power of
information technology makes possible new services of great economic
value. Credit cards, overnight package delivery, and worldwide
reservation systems are examples of services that are based on new
information technologies, Information and technology that delivers it
have become critical, strategic resources for business firms and their
managers.

Transformation of the Business Enterprise

The third major change in the business environment is the very nature of
organization and management. There has been a transformation in the
possibilities for organizing and managing. Some firms have begun to
take advantage of these new possibilities.
The purpose of a business firm is to show a profit by creating value
through the production of services and products. The purpose of
management is to plan, organize, coordinate, and lead the members of
the firm in order to achieve profitable value creation. Information
technology has transformed how the firm creates value and how
managers manage in each levels of Management. It is described as a
pyramid structure.

Figure 1.3: Transformation of the Business Enterprise

The traditional business firm was - and still is - a hierarchical,
centralized, structured arrangement of specialists that typically relies on
a fixed set of standard operating procedures to deliver a mass-produced
product (or service). The new style of business firm is a flattened (less

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hierarchical), decentralized, flexible arrangement of generalists who rely
on real time (nearly instant) information to deliver mass-customized
products and services uniquely suited to specific markets or customers.
This new style of organization is not firmly entrenched, it is still evolving.
Nevertheless, the direction is clear. This new direction would be
unthinkable without information technology.
The traditional management group relied - and still does- on formal
plans, a rigid division of labour, formal rules, and appeals to loyalty to
ensure the proper operation of a firm. The new manager relies on
informal commitments and networks to establish goals (rather than
formal planning), a flexible arrangement of teams and individuals
working in task forces, a customer orientation to achieve coordination
among employees, and appeals to professionalism and knowledge to
ensure proper operation of the firm. Once again, information technology
makes this style of management possible.
1.3 OBJECTIVES OF INFORMATION SYSTEMS
Requests for information systems are typically motivated by one of three
general objectives:
Solve a Problem
An activity, process, or function that does not now or may not in the
future meet performance standards or expectations unless remedial
actions are taken.
Example: Reduce excessive data entry errors by eliminating the manual
entry of sales details.
Capitalize on an Opportunity
A change to expand or improve business performance and competitive
achievements
Example: Capture a large base of customers by offering a new airline
frequent flier program focusing on discounted airfares.

Respond to a Directive
An order, request, or mandate originating from a legislative or
management authority to provide information, perform in a certain
manner, or alter either information or performance.
Example: Report annually to the Indian Revenue Service, using
prescribed formats, interest earned on savings, checking, and time
deposit accounts. To achieve these objectives, firmly typically undertake
projects for one or more of the following reasons-the five C’s:

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 Capability

Communication

Competitiveness

Control

Cost

5C’s: Reasons for Initiating Information Systems Projects.

Capability
Greater Processing Speed: Using the computer’s inherent ability to
calculate, sort, and retrieve data and information when greater speed
that of people doing the same tasks is desired.
Increased Volume: Providing the capacity to process a greater amount
of activity, perhaps to take advantage of new business opportunities.
Often a result of growth that causes business to exceed the capacities
and procedures underlying the achievements to date.
Faster Information Retrieval: Locating and retrieving information from
storage. Conducting complex searches.

Control
Greater accuracy and improved Carrying out computing consistency
better security steps, correctly and in the same way each time.
Better Security Safe guarding sensitive and important data in a form that
is accessible only to authorized personnel.

Communication
Enhanced Communication Speeding the flow of information and
messages between remote locations as well as within offices. Includes
the transmissions of documents within offices.
Integration of Business Area: Coordinating business activities taking
place in separate areas of an organization, through capture and
distribution of information.

Cost
Cost Monitoring: Tracking the cost of labour, goods and facilities to
determine how actual costs compare with expectations.
Cost Reduction: Using computing capability to process at a lower cost
than possible with other methods, while maintaining accuracy and
performance levels.

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Competitive advantage
Lock in Customers: Changing the relationship with and services
provided to customers in such a way that they not choose to change
suppliers. Improve Arrangements with changing the pricing, Suppliers
service, or delivery arrangements, or relationship between suppliers and
the organization to benefit the firm. New Product Development:
Introducing new products with characteristics that use or are influenced
by information technology.

Activity 1
Standard International (SI) is subsidiary to a large manufacturing firm: it
is responsible for marketing, sales, and distribution outside the United
States. Standard International does not develop products: the parent
firm creates all products it sells. SI has operations in 30 countries. In
virtually all these countries the local SI operation is treated legally as a
subsidiary of Standard International.
Recently a new president took control of SI. Historically the firm’s
systems were oriented to finance and accounting because the
technology group reports to the vice president of finance. Accounting
applications are important because so many different currencies are
involved. The new president, however, is impatient and feels that
technology should be able to do something for marketing and sales.
She asked you to consult with SI in the hope of finding a strategic
application technology: “I want something that will give us a competitive
edge, “she said. How does it establish and maintain a competitive
advantage?

LET US SUM UP
We have discussed about the Information System and the Emergence of
Global Economy. IS made transformation in the Business enterprise and
Managers manage in each level of Management. WE have discussed
about the objectives of IS and the 5 C’s which initiates the Information
system projects across Globe.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1) An information system can be defined technically as a set of
____________ Components

a) Interrelated b) correlated

c) Unrelated d) Semi- related

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2) The main objectives of Information System
a) Communication b) Solve a Problem
c) Responsiveness d) linkage function

3) Productivity of employees will depend on the _________ of the

systems
Serving them
a) Communication b) Quality
c) Quantity d) Cost
4) ________ tracking the cost of labour, goods and facilities to
determine how actual costs compare with expectations.

a) Cost Monitoring b) Cost Reduction

c) Quantity d) Cost
5) The purpose of management is to plan, organize, coordinate, and
lead the members of the firm in order to achieve profitable
_____________

a)Value creation b) cost reduction

c) Quality d) Money

GLOSSARY

Output : An output is data that a computer

sends. Computers only work with
digital information.

Capability : The ability to perform or achieve

certain actions or outcomes.

Communication : Communication is simply the act of

transferring information from one
place, person or group to another.

Competitiveness : The ability of a business to deliver

better value to customers than
competitors.

Control : Control is a function of

management which helps to check
errors in order to take corrective
actions

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 SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems & data
processing, 2nd edition, Holt, Rinehart and Winston publications,
University of California. ISBN 0039106888, 9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information Systems: A
Management Approach, Subsequent edition, Macmillan Publications,
University of Virginia. ISBN 0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st Edition,
TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System, illustrated
edition, Prentice-Hall publications, University of Wisconsin,ISBN
0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management Information
Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1)a 2) b 3)b 4)a 5)a

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Unit 2

INTRODUCTION TO MANAGEMENT
INFORMATION SYSTEM
STRUCTURE

Overview

Learning Objectives

2.1 Introduction

2.2 Emergence of Management Information Systems

2.3 Definition of Management Information Systems

2.4 Elements of Management Information Systems

2.5 Scope of Management Information Systems

Let Us Sum Up

Check Your Progress

Glossary

Suggested Readings

Answers to check your progress

OVERVIEW
Information processing is a major societal activity. A significant part of an
individual working and personal time is spent in recording, searching for,
and absorbing information. As much as 80% of a typical executive’s time
is processing and communication information. More than 50% of the
United States workforce is employed in jobs that involve some form of
information processing. A large proportion of these employees are
“knowledge workers”; their duties involve the production and use of
information outputs – documents, reports, analyses, plans, etc.
Computers have become an essential part of organizational information
processing because of the power of technology and the volume of data
processed. Today, computerized processing of transaction data is a
routine activity of large organizations. Moreover, the capability to
automate information processing has permitted an expansion in the
scope of formalized organizational information use. The current
challenge in information processing is to use the capabilities of
computers to support knowledge work, including managerial activities
and decision making. The wide variety of computer resources to perform

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transaction processing, to provide processing for formal information and
reporting system and to accomplish managerial-decision support are
broadly classified as the organization’s management information system.
MIS is a broad concept rather than a single system. Some MIS activities
are highly integrated with routine data processing, while other MIS
applications are designed for a particular knowledge work activity or
decision-making function. The office use of computer and
communication technology to support person-to-person communications
and clerical support is also included in this text as part of management
information systems.

LEARNING OBJECTIVES

After reading this unit, you should be able to,

• define management information systems
• explain the nature and scope of information systems
• discuss the classification of information systems.

2.1 INTRODUCTION
Management’s job is to make sense out of the many situations faced by
organizations, make decisions, and formulate action plans to solve
organizational problems. Managers perceive business challenges in the
environment; they set the organizational strategy for responding to those
challenges; and they allocate the human and financial resources to
coordinate the work and achieve success. Throughout, they must
exercise responsible leadership.
They must also create new products and services and even re-create
the organization from time to time. A substantial part of management
responsibility is creative work driven by new knowledge and information.
Information technology can play a powerful role in helping managers
design and deliver new products and services and redirecting and
redesigning their organizations.

2.2 EMERGENCE OF MANAGEMENT INFORMATION SYSTEMS

As the business survives and grows, supervision of the activities
associated with it develops beyond the scope of one man. He finds that
he must be in more than one place at the same time to plan, direct,
coordinate, analyze, and control (i.e., to manage) all the different
activities of his enterprise. The face-to-face encounters for solving
problems, transferring information, and checking on performance that
were adequate when the business was very small become too
numerous and time-consuming. In other words, the one-man owner-

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manager finds himself over his head in a complex network of interrelated
duties that must be discharged. His response is predictable and
practical. He recognizes his need for help if his business is to continue to
grow, and he hires another man to assist him in his management
functions. It should be recognized that because he was the sole owner-
manager, all his actions up to this point were, by definition,
management. But, with a second manager on this scene, managing
begins to require more definition.
Suddenly, problems of authority and responsibility, and communication
and organization, begin to assume serious proportions. Where does one
man’s area of authority and responsibility begin and where does the
others man’s end? Who tells whom to do what? Who reports to whom?
The whole spectrum of organizational problems appears on the horizon,
and the need for a Management Information System (MIS) begins to
take shape.
Ideally, the evolution of an MIS would be guided by knowledgeable
people, careful to structure the information system to meet the objectives
of the organization and the realities of its internal and external
environment. But experience indicates that an MIS evolves in fits and
starts to meet sudden and to respond to unforeseen crisis.
The result, as may be expected, is a system that grows with little
attention to the overall needs of the total organization. It usually takes
shape as a patchwork of information subsystems, some connecting with
others, some overlapping, some duplicating, and many working at cross-
purposes.
As the organization develops, the managers establish better
communications channels to meet their needs for accurate, timely
information. Formal, semiformal, and even informal reporting habits are
standardized, proceduralized, and scheduled. Information flows are
structured for early warning of problems, quick response to crisis, and
clear pathways for management directives to the critical action points of
the organization. A viable Management Information System is born!
The criterion for an effective Management Information System is that it
provides accurate, timely, and meaningful data for management
planning, analysis, and control to optimize the growth of the
organization. Neither the glamour of the equipment nor the
sophistication of the decision techniques can offset the failure of a
Management Information System to meet that test. It must enhance the
management of the organization.

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 Figure 2.1 Management Information System

2.3 DEFINITION OF MANAGEMENT INFORMATION SYSTEMS

Information System-Webster Definition:

“Knowledge communicated by others or obtained by study and
Investigation”
Using this definition what are the source of information received by the
typical business? One important channel of information is the mail. Each
day hundreds or even thousands of items of information come into a
business via the United States post office. Much of this information is
routine-such as orders for products, invoices for material purchased,
confirmation of goods shipped, bills of lading, or checks in payment of
accounts. Some of the information entering a business through the mails
is less routine –for example letters of complaint, requests for job
interviews, or requests for information about former employees.
The definition of a management information system by Davis Olson as
the term is generally understood is an integrated, user-machine
interactive system for providing information to support operations,
management, and decision-making functions in an organization. The
system utilizes computer hardware and software; manual procedures;
models for analysis planning, control and decision making; and a
database. The fact that it is an integrated system does not mean that it is
single, monolithic structure; rather, it means that the parts fit into overall
design.

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2.4 ELEMENTS OF MANAGEMENT INFORMATION SYSTEMS

Figure 2.2 Structure of MIS

The information system of an organization would be probably operates
on the following infrastructure. Inquiry may be processed in the
infrastructure to provide output to the users.

Information system is built by the following pillars (Infrastructure):

Hardware

Software

Procedures

Database

And Users [operational personnel, managers, system analyst etc.

Hardware
Hardware refers to physical computer equipment and associated
devices.

Hardware must provide for major functions:

Input and Output

Storage for data and programs

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 Central processor (computation, control and primary storage)

Software
Software is broad term given to the instructions that direct the operation
of the hardware. The software can be classified into two major types:
system software and application software.

Database
The database contains all date utilized by application software. An
individual set of stored data is often referred to as a file. The physical
existence of stored data is evidenced by the physical storage media
(computer tapes, disk packs, diskettes, etc..) used for secondary
storage.

Procedures
Formal operating procedures are physical components because they
exist in a physical form such as a manual or instruction booklet. Three
major types of procedures are required.
1. User instructions (for users of the application to record data, or use
the result)

2. Operating instructions for computer personnel.

3. Non requiring information usually is not subject to automation.

Activity 1
Auto zip sells accessories for cars through a chain of stores on the West
Coast. The company started a catalog sales division 4 years ago that
now accounts for 25 percent of sales. Customers like the convenience of
calling a toll-free number and having the parts they delivered via UPS or
an overnight carrier such as Federal Express.
The president of Auto zip realizes that the firm needs to have a presence
on the internet. He is trying to decide whether to accept orders on the
web, and if so, how. He is caught between two positions offered by his
staff. The marketing vice president advocates taking orders on the Web.
Her reasoning is: What have we got to lose? We have everything to
gain; it’s another market channel and our competitors are already there
or will be soon. We save money because customers act as their own
order entry personnel.
The controller disagrees. His reasoning is: Any advantage we gain will
be temporary: it is so easy to set up a system to order on the web that
everyone will take Web orders and we won’t gain a sustainable
advantage.

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The president has to make a decision. First, should Autozip accept
orders on the Web, and second, if so, how?

2.5 SCOPE OF MANAGEMENT INFORMATION SYSTEMS

Structurally an organization’s information systems are a collection of
business information systems for marketing, manufacturing, personnel,
purchasing and other business functions. Each of these basic business
functions comprises transaction level activities, routine decision making
and the occurrence of unique decision requirements and
office/departmental support applications. It makes sense that the various
business functions in an organization will need information systems
support. Managers realize that it is impossible and undesirable to
attempt to build a monolithic information system.
Management Information Systems develop in response to the needs of
management for accurate, timely and meaningful data in order to plan,
analyze and control the organization’s activities and thereby optimize its
survival and growth. The MIS accomplishes this mission for
management by providing means for input, helps management respond
to current and future changes in the internal and external environment of
the organization.

Financial Information
Every company has a financial information system .The basis of this
system is to plan and to find out the best way in tracking out the
accounting system and the methodology to be adopted in the financial
management to be followed by the organization.

Personnel Information
The personnel information system is concerned with the flow of
information about people working in organization. Almost every company
maintains records of its personnel.

Logistics Information
A logistic system like the other two major systems is principally
concerned with recurring, documentary, internal and historical
information of the solutions to the logistics.

Marketing Information
A marketing information system tends to help in handling the entire
activity of marketing and sales functions completely with the detail effort
of coordinating various information activities.

18
Research and Development
Many companies have management system for exchanging information
on the results of research findings and further research areas to the new
product development.
MIS is used in the field of Accounting, computer Science, Operational
research, Behavioral science and Management.

Figure 2.3 Scope of research

The value of information is rarely determined on the basis of the
information alone. Here we see where the information is from.
1. Meeting and Other Interpersonal Communications Such as

Immediate coworkers and staff

Peers form other functions

Task forces or ad hoc committees

Communication meetings

Meetings for ongoing committees

2. Characteristics of Effective Meeting

Communication

Management by walking around

Interactions

3. Reports: Useful & Otherwise

Research questions on reports

Types of information in reports

19
 Operating information

Status information

Benchmark comparisons

Reference information

Types of reports

Daily reports

Weekly reports

Monthly reports

Other reports

4. Electronic technologies

Internet and electronic media are used to communicate others.

The most common types of information systems used in business
organizations are electronic commerce systems, transaction processing
systems, management information systems, and decision support
systems. In addition, some organizations employ special-purpose
systems such as artificial intelligence systems, expert systems, and
virtual reality systems. Together, these systems help employees in
organizations accomplish both routine and special tasks-from recording
sales, to processing payrolls, to supporting decisions in various
departments, to providing alternatives for large-scale projects and
opportunities.

CASE STUDY
From Teaspoons to Satellites
In 1984, two young women and a man sat on their living room floor,
using teaspoons to fill jars and containers with skin care products. They
were the founder’s of Nu Skin International, a producer of additive-free
skin care products aimed at aging baby boomers. Initially Nu Skin’s
founders Blake. Roney and Sandie Tillotson promoted Nu Skin products
themselves. They sold their wares at mails and airports and to family
and friends- wherever people congregated.
Demand for the product spread like wildfire. Ten years later, Nu Skin’s
revenues have soared to over $500 million. Roney and Sandie Tillotson
preside over a vast network of Nu Skin distributors in Canada, Mexico,
Hong Kong, Taiwan, Japan, Australia, and New Zealand. While one Nu
Skin distributor hosts a live satellite broadcast to thousands of
distributors all across North America his Taiwanese counterpart can

20
transmit an order via voice mail on high-speed links to Nu Skin’s
headquarters in Provo, Utah. New technologies and information systems
have made that spectacular growth possible.
Without the cash or resources of giant cosmetics companies, Roney and
Sandie Tillotson, and other co-founders decided that they could build
their company through network marketing. Nu skin creates networks of
distributors who could be responsible for promoting and selling Nu Skin
products on a commission basis. Distributors in turn could create
“downlines” or networks of distributors working under them. Some
distributors have tens of thousands of people working under them on
three continents. To keep the distributors happy and the sales and
distribution network humming Nu Skin’s managers believed that it was
all important to get distributors their commission checks on time.
Nu Skin built a seamless compensation system. No matter how many
people or how many different countries were in a distributors “downlines”
empire, Nu Skin paid the distributor once a month with one check. (Most
other multi level marketing companies write the distributors one check
for each market. ) Nu Skin continually upgraded its information systems
to make sure that it could handle its sky rocketing volume of sales
transaction and commission checks as the company grew monthly at
double digit rates. Nu Skin upgraded its computer hardware and
software multiple times. The company now runs a $3.5 million Sequoia
mainframe computer that keeps records of every sales transaction for
the past fourteen months and calculates commissions for 250,000 active
distributors. Each distributor is eligible for commissions on six levels of
sales. The information system crunches the numbers and transmits the
results back to each Nu Skin market. It cuts checks in U.S dollars,
Australian dollars, Yen, Pesos- whatever the local currency is Nu Skin
also developed an application that translates prompts on the computer
screen into various foreign languages. If a distributor in Tokyo or Mexico
city needs to check personal and group sales volumes, he or she simply
calls the local office. An agent accesses the companies mainframe
computer, pulls up a screen in the appropriate language, and relays the
requested information directly back to the distributor, no translations are
needed.
Nu Skin developed a voice information program (VIP) to connect
distributors to its down lines. A distributor can use telephone, voice mail,
or facts for prospecting, recruiting and keeping in touch with its down
lines. A future called business card lets a prospective distributor call an
800 number and listen to a tape about Nu Skin business opportunities.

21
The system captures the prospect’s phone number so that the distributor
can immediately make a follow – up call. Some distributors, such as Lien
Yu Shing in Taiwan, use VIP every month to place their orders.
Within three years, Nu Skin plans to move into at least 6 to 12 new
countries, with the main push in Europe. The technological infrastructure
is in place. With its for- reaching information systems, Nu Skin can open
a new market in 90 days- without a teaspoon is sight.
Nu Skin’s reliance on information systems to drive its basic operations
demonstrates how information systems can help both small and large
companies compete in today’s global business environment. Information
systems help firms like Nu Skin extend their reach to faraway locations,
offer new products and services, reshape jobs and workflows, and
perhaps profoundly change the way they conduct business. Information
systems understanding are essential for today’s managers.

Will most organizations need information systems to survive?

LET US SUM UP
We have discussed the vital role of information in an organization. The
information systems have become essential for helping organizations
deal with changes in global economies and the business enterprise.
Information systems provide firms with communication and analytic tools
for conducting trade and managing business on a global scale.
Information systems are the foundation of new knowledge based
products and services in knowledge economies and help firms manage
their knowledge assets. Then the manager who is the organizer knows
all information, and talented person. He should have skill to manage
everything and have courage to solve problems. And he should be a
good communicator.
Powerful computers, software and networks, including the internet , have
helped organizations become more flexible, eliminate layers of
management , separate work from location, coordinate with suppliers
and customers, and restructure work flows, giving new powers to both
line workers and management. Information technology provides
managers with tools for more precise planning forecasting and
monitoring of the business. To maximize the advantages of information
technology, there is a much greater need to plan the organization’s
information architecture and information technology infrastructure.

22
CHECK YOUR PROGRESS

Choose the Correct Answer:

1. ________ is the Information about people working in organization.
a) Personnel Information b) Marketing Information

c) Financial Information d) Pricing information

2. __________ is a Characteristics of Effective Meeting.

a) Teaching b) Communication

c) Budgeting d) controlling

3. __________ reports are sent on daily basis

a) Daily reports b) Weekly reports

c) Monthly reports d) other reports
4. A __________ system tends to help in handling the entire activity of
marketing and sales functions

a) Marketing Information b) Personnel Information

c) Pricing Information d) Financial Information
5. An individual set of stored data is often referred to as a
file__________

a) Software b) Database

c) Storage Unit d) Compact Disk

GLOSSARY

Database : A database is a data structure that stores

organized information.
Most databases contain multiple tables,
which may each include several different
fields.

Business Management : Managing the coordination and

organization of business activities.

Data : Data is a collection of facts, such as

numbers, words, or even like
measurements, observations or just
descriptions of things.

Secondary storage : Refers to storage devices

23
 and storage media that are not always
directly accessible by a computer.

Operations : The actions and decisions made by

participants and members of a business
that affect the production, distribution,
service, management, etc.

Software : Instructions that tell a computer what to

do. Software comprises the entire set
of programs, procedures.

Production : Production is a process of combining

various material inputs and immaterial
inputs (plans, know-how) in order to
make something for consumption

SUGGESTED READINGS

1. Bentley Trevor J (1986) Management Information Systems &

data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) a 2) b 3) a 4)a 5)b

24
Unit 3

CONCEPTS OF SYSTEM AND

ORGANIZATIONS
STRUCTURE

Overview

Learning Objectives

3.1 Organization

3.2 Types of Organization

3.3 Benefits of Organization

3.4 Information flow in an Organization

Let Us Sum Up

Glossary

Check Your Progress

Suggested Readings

Answers to check your progress

OVERVIEW
It is often said that good people can make organization pattern work.
Some even assert that vagueness in organization is a good thing in that
it forces teamwork, however, there can be no doubt that good people
and those who want to cooperate will work together most effectively if
they know the parts they are to play in any team operation and the way
their roles relate to one another. This is as true in business or
government as in football or in a symphony orchestra. Designing and
maintaining these systems of roles is the managerial function of
organizing.

In this sense that we think of organization as

• The identification and classification of required activities
• The grouping of activities necessary to attain objectives
• The assignment of each grouping to a manager with the authority
necessary to supervise it, and
• The provision for coordination horizontally and vertically in the
organization structure.

25
LEARNING OBJECTIVES

After reading this unit, you should be able to

• define the organisation
• classify the organization
• classify the types of organization and explain the benefits of
organization.

3.1 ORGANISATION

Figure 3.1 Organizational Chart

According to Lewis H. Haney, “Organization is a harmonious
adjustment of specialized parts for the accomplishment of some
common purpose or purposes”.
Louis A. Allen has defined organization as “the process of identifying
and grouping the work to be performed, defining and delegating
responsibility and authority and establishing relationship or the purpose
of enabling people to work most effectively together in accomplishing
objectives”.

Organization can also be defined as

Determining what tasks are to be done, who is to do them, how the tasks
are to be grouped, who reports to whom, and where decisions are to be
made.

26
 It is a management function involving assigning duties, grouping
tasks, delegating authority and responsibility and allocating resources to
carry out a specific plan in an efficient manner.
Process of identifying and grouping the work to be performed,
defining and delegating responsibility and authority and establishing
relationships for the purpose of enabling people to work most effectively
together in accomplishing objectives.
In a nutshell, organization refers to grouping of activities and
resources in a logical fashion.
Organization aims at finding out the objectives, grouping the activities
aimed at theory achievement, assigning them for performance and
coordinating them. It is important for the following reasons.
a) Organizations pervade all the important phases of human life. A
man is born in organization (hospitals and clinics). He is educated in an
organization (schools, colleges and universities). He works in an
organization (office factories and business).

b) Knowledge of organization helps the manager to work effectively.

c) Organization satisfies and sometimes frustrates, if is not well
organized.

3.2 TYPES OF ORGANIZATION

The two types of an organization are

Formal organization

Informal organization

Figure 3.2 Types of Organization

Formal Organization
Formal organization means the intentional structure of roles in a formally
organized enterprise. Describing an organization as “formal” however
does not mean there is anything inherently inflexible or unduly confining

27
about it. If a manager is to organize well, the structure must furnish an
environment in which individual performance, both present and future,
contributes most effectively to group goals.
Formal organization must be flexible. There should be room for
discretion, for advantageous utilization of creative talents, and for
recognition of individual likes and capacities in the most formal of
organizations. Yet individual efforts in a group situation must be
channeled toward group and organization goals.
Although the attainment of goals must be the reason for any cooperative
activity, we must look further for principles to guide the establishment of
effective formal organization. These principles pertain to the unity of
objectives and organizational efficiency.

Informal Organization
Chester Barnard, author of the management classics. “The Functions
of the Executive,” described informal organization as many joint personal
activity without conscious joint purpose, even though contributing to joint
results. Thus the informal relationships established i n the group of
people playing chess during lunchtime may aid in the achievement of
organizational goals. It is much easier to ask for help on an organization
problem from someone you know personally, even if she may be in a
different department, than from someone you know only as a name on
an organization chart. More recently, Keith Davis of Arizona State
University, who has written extensively on the topic and whose definition
will be used here as described the informal organization as a network of
personal and social relations not established or required by the formal
organization but arising spontaneously as people associate with one-
another. Thus, informal organization –relationships not appearing on an
organization chart-might include the machine shop group, the sixth floor
crowd, the Friday evening bowling gang, and the morning coffee
regular’s.

3.3 BENEFITS OF ORGANIZATION

The process of organizing helps an individual to develop a clear
picture of the tasks he or she is expected to accomplish.
The process of organizing supports planning and control activities by
establishing accountability and an appropriate line of authority.
Organizing creates channels of communication and thus supports
decision-making and control.

28
 The process of organizing helps maintain the logical flow of work
activities. By doing so, it helps individuals and workgroups to easily
accomplish their tasks.
Organizing helps an organization to make efficient use of its resources
avoid conflict and duplication of effort.
Organization coordinates activities that are diverse in nature and helps
to build harmonious relationships among members involved in those
activities.
The process of organizing helps to managers to focus task efforts such
that they are logically and efficiently related to a common goal.

3.4 INFORMATION FLOW IN AN ORGANIZATION

Hierarchy is the existence of superior/ subordinate relationships,
resulting in a “chain of command“; this means that multiple “levels“ of
personnel exists in an organization. In a small organization perhaps
there are only two levels: the owner-boss and a few employees. In a
large organization many levels: at the lowest level are workers, who
carry out the primary activities; at the second level are group leaders,
department heads, or supervisors; at the middle level there is a series of
managers; and at the highest level there is a superstructure of division
heads, vice presidents, senior vice presidents, and president reports to
the board of directors, the highest level as a company.
In a large organization a dozen or more hierarchical levels may be
present. A chart of organization for medium-sized company is shown in
figure 3.1. Only the marketing, accounting, and information systems
functions are portrayed in detail. The hierarchy of an organization affects
its information systems; the hierarchical structure is the fundamental
framework around which the information system is organized. With few
expectations and without regard to what other information flows may
also exist, the information system is organized to pass information
upward along the lines of the hierarchy. Information is usually
summarized at each level as it flows up; information provided by
organization units at one level is combined at that level and then flows
up to the next level, and at that next level a similar combining and
upward flow takes place. Thus fewer details are provided to each
successively higher level.
Information also flows downward along hierarchical lines in the form of
directives, policies, and action guidelines; these types of information are
less likely to be generated by the computer system and are usually
downward flows constitute an important part of information and

29
communication systems because they channel and direct the activities
of managers at each lower level.
The major organization unit that is concerned with the development of
information systems usually is the computer information systems
department, which is often unaware of the importance of downward-
flowing information and which devotes none of its systems development
efforts to this information flow. When these downward flows are not
properly developed, managers at each level usually are consistent in
their criticism of “the lack of communication from above.” Downward -
flowing information systems merit more attention on the part of both
managers and information systems specialists.
Information flows are not restricted to paths up and down the hierarchy.
Information also flows laterally within an organization, particularly in
transactions processing information system. These lateral information
flows are often extensive, and they help explain the complexity of
information systems in organizations.
People in any work setting, large or small, must have available to them
the right information at the right time and in the right place if they are to
perform effectively. This is made possible by information systems that
use the latest in information technology to collect, organize, and
distribute data in such a way that they become meaningful as
information. Such systems have the potential to make major
contributions to performance in organizations. However the following
factors are considered essential to their success:

Technical quality of the system

Participation and involvement of users in the system design and

Management support

Activity 1
A car company was in trouble. It become clear that it had to compete not
only against U.S carmakers but also against auto manufacturers
throughout the world. Drastic steps were necessary. One of the best way
was to replace the bureaucratic structure. Previously it took 5 years to
produce a new model. The old approaches are as follows: the product
Planners developed the general concept of the new model, which was
then given to the designers. After that, engineers got involved,
developing specifications for manufacturing and for various suppliers .
This process was sequential, with little communications, among the
groups. If a problem was discovered at the manufacturing stage,

30
designers & engineers had to be involved in again doing the problem.
What changes can be in order to compete with other companies?

LET US SUM UP
Over time, information systems have come to play a larger role in the life
of organizations. There is a growing interdependence between business
strategy, rules, and procedures, on the other hand, and information
systems software, hardware, data, and telecommunications, on the
other. A change in any of these components often requires changes in
other components. This relationship becomes critical when management
plans for the future. What a business would like to do in 5 years is often
dependent on what its systems will be able to do.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1. Grapevine communication exists more in __________

a) Formal organization b) Informal organization

c) Industrial organization d) semi-formal organization

2. Roles are clearly defined in the ____________

a) Formal organization b) Informal organization

c) Industrial organization d) semi-formal organization

3. Flexibility is seen more in __________ organizations

a) Formal organization b) Informal organization

c) Industrial organization d) semi-formal organization

4. __________ of organization helps the manager to work effectively.

a) Place b) Management

c) Information system d) Database

5. The process of organizing helps maintain the ________ of work
activities.

a) Logical flow b) analytical flow

c) Procedural flow d) systematic flow

GLOSSARY

Computer : Computer is an electronic device

which is used for fast calculation..

31
Marketing : Marketing is the process of
interesting potential customers and
clients in your products and/or
services.

Finance : Finance is a broad term that

describes activities associated with
banking, leverage or debt, credit,
capital markets, money, and
investments.

Logistics : Logistics refers to the overall

process of managing how
resources are acquired, stored,
and transported to their final
destination.

Operations : The actions and decisions made

by participants and members of a
business that affect the production,
distribution, service, management,
etc.

Input: : Input is to provide or give

something to the computer, in
other words, when a computer or
device is receiving a command or
signal from outer sources, the
event is referred to as input to the
device.

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.

32
 4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) b 2) a 3) b 4) c 5)a

33
Unit 4

STRATEGIC USES OF INFORMATION

TECHNOLOGY
STRUCTURE

Overview

Learning Objectives

4.1Strategic Uses of Information Technology

4.2 Modern Information Systems in Organization

4.2.1 Transaction Processing Systems

4.3 Knowledge Work and Office Automation Systems

4.4 Management Information System

4.4.1 Characteristics of MIS

4.5 Systems Concept

4.6 Sales and Marketing Systems

4.7 Manufacturing and Production Systems

4.8 Finance and Accounting Systems

4.9 Human Resources Systems

Let Us Sum Up

Glossary

Check Your Progress

Suggested Readings

Answers to check your progress

OVERVIEW
Management information systems are built for use by an identified
organization. Hence it is very important to understand the organization -
its primary goals and objectives, structure, dynamics, scale of operation,
culture, tradition, social setting, level of competition, value system and
the environment. An MIS well designed from the technical
considerations may fail if the dynamics of the organization are not
properly understood. In this chapter we will present a quick overview of
modern organizations and concept of system.

34
LEARNING OBJECTIVE

After reading this unit, you should be able to,

• explain the Management Information System concept
• categorize the types of information system
• explain the concept of system.

4.1 STRATEGIC USES OF INFORMATION TECHNOLOGY

Information technology plays an important role in delivering value for a
business and supporting organizational transformation. To achieve
that, chief information officers have become key members of board
teams developing and delivering strategic solutions for the business.
The aim is to make an organization more competitive by aligning
business strategy with IT strategy.

Support Innovation
Organizations that want to improve their innovation capabilities and
develop new products or services for the market can use cloud
computing to speed up the process. Cloud computing enables
organizations to rent additional IT resources during the development
project on a pay-as-you-go basis, rather than investing in fixed
resources. Organizations can use the additional resources to run pilot
programs or speed up development. This provides an important strategic
advantage by enabling the organization to get new products to market
quickly, ahead of the competition.

Improve Responsiveness
Cloud computing enables organizations to scale up their IT resources
quickly in response to changing market conditions. Organizations that
offer products and services online may find it difficult to handle a surge
in traffic, which could result in lost business. Adding resources from the
cloud provides a strategic advantage by enabling them to respond to
changes in demand, increase revenue and maintain customer
satisfaction.

Increase Collaboration
IT solutions that improve collaboration in an organization can provide an
important competitive advantage. Issuing field service teams with smart
phones, for example, enables service engineers to provide a faster,
more efficient service to customers. Engineers working on a customer
site can set up voice or video conference calls with product or technical
experts at headquarters to discuss and resolve a complex issue, rather

35
than delaying a repair. Offering customer superior service provides a
strategic advantage by differentiating an organization from competitors.

Enhance Customer Insight

Collecting and analyzing data to gain greater insight into customers’
needs and preferences provides a strategic advantage. By using
powerful analytics software, organizations can develop customized
offers and personalized communications that help to increase customer
satisfaction and foster loyalty.

Introduce New Business Models

Organizations can use IT to make strategic changes to their business
models. A company that traditionally sold products through retail outlets
might use IT to develop an e-commerce model that enables it to reach a
wider market, reduce its distribution costs and offer a more convenient
service to customers.

4.2 MODERN INFORMATION SYSTEMS IN ORGANIZATION

There are 4 main types of information systems serving different
organizational levels; operational level systems, knowledge level
systems, management level systems, and strategic level systems.

Figure 4.1 Modern Information Systems in Organization

Operational-level systems support operational managers by keeping
track of the elementary activities and transactions of the organizations,
such as sales, receipts, cash deposits, payroll, credit decisions, and the
flow of materials in a factory. The principle purpose of systems at this
level is to answer routine questions and to track the flow of transactions
through the organization. How many parts are in inventory? What is the
size of the payroll this month? To answer these kinds of questions,
information generally must be easily available, current, and accurate.

36
Examples of operational level systems include a system to record bank
deposits from automatic teller machines or one that tracks the number of
hours worked each day by employees on a factory floor.
Knowledge-level systems support knowledge and data workers in an
organization. The purpose of knowledge level systems is to help the
business firm integrate new knowledge into the business and to help the
organization control the flow of paper work. Knowledge level systems,
especially in the form of work stations and office systems, are the
fastest-growing applications in business today.
Management-level systems are designed to serve the monitoring,
controlling, decision making, and administrative activities of middle
managers. The principal question addressed by such systems is: Are
things working well? These systems compare the current days’ output
with that of a month or year ago. Management level systems typically
provide periodic reports rather than instant information on operations.
Strategic-level systems help senior management tackle and address
strategic issues and long term trends, both in the firm and in the external
environment. Their principal concern is matching changes in the external
environment with existing organizational capability. What will
employment levels be in five years? What products should we be
making in five years?
Information systems may also be differentiated by functional specialty.
Major organizational functions, such as sales and marketing,
manufacturing, finance, accounting, and human resources, are each
served by their own information systems.
There are six major types of information systems in contemporary
organizations:

Transaction processing system (TPS) at the operational level.

Knowledge work systems (KWS) and

Office automation systems (OAS) at the knowledge level.

Management information systems (MIS) and

Decision support systems (DSS) at the management level.

Executive support systems (ESS) at the strategic level

37
 Figure 4.2 Six major types of information systems
4.2.1 Transaction Processing Systems
Transaction processing systems are the basic business systems that
serve the operational level of the organization. A transaction processing
system is a computerized system that performs and records the daily
routine transactions necessary to the conduct of the business. Examples
are sales order entry, hotel reservation systems, client information (for
public agencies), payroll, employee record keeping, and shipping.
At the operational level, tasks, resources, and goals are predefined and
highly structured. The decision to grant a credit to a customer, for
instance, is made by a lower level supervisor according to predefined
criteria. The decision, in that sense, has been “programmed”. All that
must be determined is whether the customer meets the criteria. Two
features of TPS are noteworthy. First, many TPS span the boundary
between the organization and its environment. They connect customers
to the firm’s ware house, factory, and management. If TPS do not work
well, the organization fails either to receive inputs from the environment
(orders) or to deliver outputs (assembled goods). Second, TPS are
major procedures of information for the other types of systems. TPS can
be viewed as “organizational message processing systems”, informing
managers about the status of internal operations and about the firm’s
relations with the external environment and supporting other information
systems that facilitate management decision making.

38
4.3 KNOWLEDGE WORK AND OFFICE AUTOMATION SYSTEMS
KWS and OAS serve the information needs at the knowledge level of the
organization. Knowledge work systems aid knowledge workers, whereas
office automation systems primarily aid data workers (although they are
also used extensively by knowledge workers).
In general, knowledge workers are people who hold formal university
degrees and who are all often members of a recognized profession, like
engineers, doctors, lawyers, and scientists. Their jobs consist primarily
of creating new information and knowledge. Data workers typically have
less formal, advanced educational degrees and tend to process rather
than create information. They consist primarily of secretaries,
accountants, filing clerks, or managers whose jobs are principally to use,
manipulate, or disseminate information. Office automation systems are
information technology applications designed to increase the productivity
of data workers in the office by supporting the coordinating and
communicating activities of the typical office. OAS coordinate diverse
information workers, geographic units and functional areas: the systems
communicate with customers, suppliers, and other organization outside
the firm, and serve as a clearing house for information and knowledge
flows.
Typical office automation systems handle and manage documents
(through word processing, desktop publishing, and digital filing),
scheduling (through electronic calendars), and communication (through
electronic mail, voice mail, or video conferencing). Word processing
refers to the software and hardware that creates, edits, formats, stores,
and prints documents. Desktop publishing produces professional
publishing quality documents by combining output from word processing
software with design elements, graphics, and special layout features.
The role of knowledge work and office automation systems in the firm
cannot be underestimated. As the economy shifts from relying on
manufactured goods to producing services, knowledge, and information,
the productivity of individual firms and the entire economy will
increasingly depend on knowledge level systems. This is the one reason
knowledge level systems have been the fastest growing applications
over the last decade and are likely to grow in future.

4.4 MANAGEMENT INFORMATION SYSTEM

A MIS is an integrated, user-machine system for providing information to
support operations, management, and decision making functions in an
organization. The system utilizes computer hardware and software;
manual procedures; models for analysis, planning, control and decision

39
making and a data base. The purpose of a computer based information
system is to collect, store , and disseminate information from an
organization’s environment and internal operations for the purpose of
supporting organizational functions and decision making,
communication, coordination, control, analysis and visualization.
MIS serve the management level of the organization, providing
managers with reports and in some cases, with online access to the
organization’s current performance and historical records. Typically, they
are oriented almost exclusively to internal, not environmental or external,
events. MIS primarily serve the functions of planning, controlling and
decision making at the management level. Generally they are dependent
on underlying transaction processing systems for their data.
MIS summarize and report on the basic operations of the company. The
basic transaction data from TPS are compressed and are usually
presented in long reports that are produced on a regular schedule. MIS
usually serves managers interested in weekly, monthly, and yearly
results not day-to-day activities.

4.4.1 Characteristics of MIS

MIS support structured and semi structured decision at the operational
and management control levels. However they are also useful for
planning purposes of senior management staff.

MIS rely on existing corporate data and data flows.

MIS have little analytical capability.

MIS generally aid in decision making using past and present data.
MIS are relatively inflexible.

MIS require a lengthy analysis and design process.

Information requirements are known and stable.

4.5 SYSTEMS CONCEPT

Figure 4.5 relationships between different IS

40
 Figure 4.6 TPS and MIS
Above figures illustrates how the systems serving different levels in the
organization are related to one another. TPS are typically a major source
of data for other systems, whereas ESS is primarily a recipient of data
from lower-level systems. The other types of systems may exchange
data with each other as well.
Data may also be exchanged among systems serving different
functional areas. For example, an order captured by sales system may
be transmitted to a manufacturing system as a transaction for producing
or delivering the product specified in the order.
It is definitely advantageous to have some measure of integration among
these systems so that information can flow easily between different parts
of the organization.
But integration costs money, and integrating many different systems is
extremely time consuming and complex. Each organization must weigh
its needs for integrating systems against the difficulties of mounting a
large-scale systems integration effort.
Information systems can be classified by the specific organizational
function they serve as well as by organizational level. We now describe
typical information systems that support each of the major business
functions and provide examples of functional applications for each
organizational level.

41
4.6 SALES AND MARKETING SYSTEMS

Table 4.1 Examples of Manufacturing And Production Information

Systems

System Description Organizational Level

Order processing Enter, process, and Operational

Track orders

Market analysis Identify customers and Knowledge

markets using data on
demographics,
markets, consumer
behavior, and trends.

Pricing analysis Determine prices for Management

products and services

Sales trend Prepare 5-year sales Strategic

forecasting forecast

The sales and marketing function is responsible for selling the

organization’s products or services. Marketing is concerned with
identifying the customers for the firm’s products or services, determining
what they need or want, planning and developing products and services
to meet their needs, and advertising and promoting these products and
services.
Sales are concerned with contacting customers, selling the products
and services, taking orders, and following up on sales. Sales and
marketing information systems support these activities.
Below shows that information systems are used in sales and marketing
in a number of ways. At the strategic level, sales and marketing systems
monitor trends affecting new product and sales opportunities, support
planning for a new products and services, and monitor the performance
of competitors.
At the management level, sales and marketing systems support
advertising and promotional campaigns and pricing decisions. They
analyze sales performance and the performance of the sales staff.
Knowledge-level sales and marketing systems support market research
and marketing analysis workstations.

42
At the operational level, sales and marketing systems assist in locating
and contracting prospective customers, tracking sales, processing
orders, and providing customer service support.
It shows the output of a typical sales information system at the
management level. The system consolidates data about each item sold
(such as the product code, product description, and amount of sales) for
further management analysis.
Company managers examine these sales data to monitor sales activity
and buying trends. The window on Management describes some typical
sales and marketing systems that might be found in a small business.

4.7 MANUFACTURING AND PRODUCTION SYSTEMS

The manufacturing and production function is responsible for actually
producing the firm’s goods and services. Manufacturing and production
activities deal with the planning, development, and maintenance of
production facilities.
And also the establishment of production goals; the acquisition, storage,
and availability of production materials; and the scheduling of
equipment, facilities, materials, and labor required to fashion finished
products.
Manufacturing and production information systems support these
activities. Table shows some typical manufacturing and production
information systems arranged by organizational level.
Strategic-level manufacturing systems deal with the firm’s long-term
manufacturing goals, such as where to locate new plants or whether to
invest in new and manufacturing technology.
At the management level, manufacturing and production systems
analyze and monitor manufacturing and production costs and resources.
Knowledge manufacturing and production process, and operational
manufacturing and production systems create and distribute design.
knowledge or expertise to drive the production process, and operational
manufacturing and production systems deal with the status of production
tasks.

43
Table 4.2 Examples of Manufacturing And Production Information
Systems

System Description Organizational

Level

Machine control Control the actions of Operational

machines and equipment

Computer-aided Design new products Knowledge

design (CAD) using the computer

Production planning Decide when and how many Management

Products should be produced

Facilities location Decide where to locate Strategic

new production facilities

Data about each item in inventory, such as the number of units depleted
because of a shipment or purchase or the number of units replenished
by reordering or returns, are either scanned or keyed into the system.
The inventory master file contains basic data about each item, including
the unique identification code for each item, the description of the item,
the number of units on hand, the number of units on order, and the
reorder point (the number of units in inventory that triggers a decision to
reorder to prevent a stock out). Companies can estimate the number of
items to reorder or they can use a formula for calculating the least
expensive quantity to reorder called the economic order quantity. The
system produces reports such as the number of each item available in
inventory, the number of units of each item to reorder, or items in
inventory that must be replenished.

4.8 FINANCE AND ACCOUNTING SYSTEMS

The finance function is responsible for managing the firm’s financial
assets, such as cash, stocks, bonds, and other investments, in order to
maximize the return on these financial assets. The finance function is
also in charge of managing the capitalization of the firm (finding new
financial assets in stocks, bonds or other forms of debt). In order to
determine whether the firm is getting the best return on its investment,

44
the finance function must obtain a considerable amount of information
from sources external to the firm.
The accounting function is responsible for maintaining and managing the
firm’s financial records-receipts, disbursements, depreciation, payroll-to
account for the flow of funds in a firm. Finance and accounting share
related problems-how to keep track of a firm’s financial assets and fund
flows. They provide answers to questions such as these: What is the
current inventory of financial assets? What records exist for
disbursements, receipts, payroll, and other fund flows?
Table 4.3 shows some of the typical finance and accounting information
systems found in large organizations. Strategic-level systems for the
finance and accounting function establish long-term investment goals for
the firm and provide long-range forecasts of the firm’s financial
performance. At the management level, information systems help
managers oversee and control the firm’s financial resources. Knowledge
systems support finance and accounting by providing analytical tools
and workstations for designing the right mix of investments to maximize
returns for the firm. Operational systems in finance and accounting track
the flow of funds in the firm through transactions such as paychecks,
payments to vendors, securities reports, and receipts. Review Figure
4.3, which illustrates a payroll system, a typical accounting TPS found in
all businesses with employees.

Table 4.3 Examples of Finance and Accounting Information

Systems

System Description Organizational Level

Accounts receivable Track money owed the firm Operational

Portfolio analysis Design the firm’s portfolio of Knowledge

investments

Budgeting Prepare short-term budgets Management

Profit planning Plan long-term profits Strategic

4.9 HUMAN RESOURCES SYSTEMS

The human resources function is responsible for attracting, developing,
and maintaining the firm’s workforce. Human resources information
systems activities such as identifying potential employees, maintaining

45
complete records on existing employees, and creating programs to
develop employees’ talents and skills.
Strategic-level human resources systems identify the employee
requirements (skills, educational level, types of positions, number of
positions, and cost) for meeting the firm’s long-term business plans. At
the management level, human resources systems help managers
monitor and analyze the recruitment, allocation, and compensation of
employees. Knowledge systems for human resources support analysis
activities related to job design, training, and the modeling of employee
career paths and reporting relationships. Human resources operational
systems track the recruitment and placement of the firm’s employees.
Human resources TPS for employee record keeping maintains basic
employee data, such as the employee’s name, age, sex, marital status,
address, educational background, salary, job title, date of hire, and date
of termination. The system can produce a variety of reports, such as lists
of newly hired employees, employee who are terminated or on leaves of
absence, employees classified by job type or educational level, or
employee job performance evaluations. Such systems are typically
designed to provide data that can satisfy federal and state record
keeping requirements for Equal Employment Opportunity (EEO) and
other purposes.

CASE STUDY
The West American Hospital Association is an organization of hospitals
in the greater Los Angeles area, including Palm Springs and San Diego
to the east and south and kern county to the north. Included among its
several activities are support of research projects at laboratories at
several hospitals and medical schools, dissemination of research
findings, and provision of medical specialists to outlying, smaller
institutions.
Of growing concern to the association has been the problem of whole
blood distribution among the hospitals in the southern California area.
Blood supplies are maintained by most hospitals but, through necessity
brought by perishability and uncertain demand, these are small in
quantity and often do not include an adequate representation of different
blood types. As a result, most hospitals particularly the smaller ones,
often find it necessary to locate quantities of whole blood on an
emergency basis, telephoning each nearby hospital and supply point
until some can be found with which the holding institution can part
without endangering their own operations. Delivery is affected by
automobile. This procedure is time consuming and expensive.

46
The problem of the association is rectified by a computer system which
has been installed by the Los Angeles Metropolitan hospital. That
hospital has installed a fairly large computer system for research,
statistical and operational uses and has offered the services of this
system to the Hospital Association for purposes the association deems
appropriate. The computer system has the ability to handle
teleprocessing on a real time basis. This means the computer users can
enter data, programs, and perform other work with the system using
remote terminals that employ typewriters or other input-output devices. A
perspective user need only dial the appropriate number on a telephone
associated with his terminal and he has the use of system through his
input output device, which is connected to the computer by telephone
lines. The computer system operates so fast that many such terminals
can be using the computer at once with no appreciable time delay for
anyone user. Moreover, the computer system is able to handle these
teleprocessing functions while at the same time performing the tasks
required of it by metropolitan hospital of Los Angeles.
The hospital Association is considering the establishment of a
centralized whole blood distribution center to serve the emergency
needs of the member of the hospitals. Blood of each type must be
replenished each day to bring it to specified quantity. All withdrawals and
receipts must be immediately recorded so that any hospital can
determine immediately the type and amounts of blood available.
Deliveries can be made on an emergency basis by helicopter provided
by the California highway patrol. The association has hired a professor
from a nearby college with an extensive data processing program to
advise it as to how the computer system at Los Angeles Metropolitan
hospital could be used in the operation of the centralized blood bank
system.

LET US SUM UP
One reason why information systems play a larger role in organizations,
and why they affect more people, is the growing power and declining
cost of information technology- the computers and peripheral devices
that make up the core of information systems. Today because of the
growing technology, many new hardware and software have come into
exist. This new hardware power makes powerful, easy to use software
available to complete novices. In a few hours, relatively unskilled
employees can be taught word processing, project scheduling, spread
sheet preparation, and telecommunication applications on a
microcomputer. Now it is possible for end users to design their own

47
applications and simple systems without the help of professional
programmers.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1. _____________help senior management tackle and address

strategic issues in a firm.

a)Strategic-level systems b)Operational-level systems
c) Management-level systems d) financial -level system.
2. The _________is responsible for maintaining and managing the firm’s
financial records-receipts, disbursements, depreciation, payroll-to
account for the flow of funds in a firm.

a) Marketing function b) Accounting Function

c) Managerial function d) Sales function

3. __________ is used by senior managers to make important decisions.

a) Executive-support systems b) Decision-support systems

c) Sales Systems d) Accounting system

4. The ___________ is responsible for selling the organization’s
products or services.

a) Sales and marketing function b) Accounting function

c) Managerial function d) Personnel function

5) Identifying potential employees, maintaining complete records on
existing employees is maintained by__________

a) Strategic-level systems b) HRIS

c) Operational-level systems d) Management-level systems

GLOSSARY

TPS : An information processing system for

business transactions involving the
collection, modification and retrieval
of all transaction data.

DSS : A decision support system (DSS) is

a computerized program used to
support determinations, judgments,
and courses of action in an

48
 organization or a business.

MIS : Management Information

Systems (MIS) is the study of
people, technology, organizations,
and the relationships among them.

System Concept : System concept of MIS is, therefore

one of optimizing the output of
the organization by connecting the
operating subsystems through the
medium of information exchange.

SUGGESTED READINGS
1. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.
2. Gordon B.Davis (2013) Management Information Systems, 1st
Edition, TMH Publications, India. ISBN 007066241X
3. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
4. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
5. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.

ANSWERS TO CHECK YOUR PROGRESS

1) a 2) b 3) a 4)a 5)b

49
 BLOCK 2

COMPUTER SYSTEM RECOURSES

Unit 5: Computer Hardware

Unit 6: Computer Software

Unit 7: Database Management System

Unit 8: Distributed System

50
Unit 5

COMPUTER HARDWARE
STRUCTURE

Overview

Learning Objectives

5.1 Computer Hardware

5.1.1 CPU and Primary Storage

5.1.2 Arithmetic-Logic and Control Unit

5.1.3 Primary Storage

5.1.4 Secondary Storage

5.1.5 Input Devices

5.1.6 Output Devices

5.2 Classifications of Computers

5.3 Hardware Technology Requirements for Electronic Commerce

and the Digital Firm

Let Us Sum Up

Glossary
Check Your Progress

Suggested Readings

OVERVIEW
Computer system includes both hardware and software. Computer
hardware includes central processing unit, storage unit, input devices
and output devices. Any organization and management should possess
right knowledge about Computer Hardware and its usage in the
Organization for a successful business with Information Technology

LEARNING OBJECTIVES

After reading this unit, you should be able to,

• explain the components of hardware
• classify the types of computers
• differentiate between primary and secondary storage units.

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5.1 COMPUTER HARDWARE
The hardware components of a computer system consist of five main
elements. They are,

1. Central processing unit

2. Primary storage

3. Secondary storage

4. Input devices

5. Output devices.
The central processing unit manipulates raw data into a more useful
form and controls the other parts of the computer system. Primary
storage temporarily stores data and program instructions during
processing, whereas secondary storage devices store data and
programs when they are not being used in processing. Input devices,
such as a keyboard or mouse, convert data and instructions into
electronic form for input into the computer. Output devices, such as
printers and video display terminals, convert electronic data produced by
the computer system and display them in a form that people can
understand. Communications devices provide connections between the
computer and communications networks. Buses are circuitry paths for
transmitting data and signals among the parts of the computer system.

5.1.1 CPU and Primary Storage

The central processing unit (CPU) is the part of the computer system
where the manipulation of symbols, numbers, and letters occurs, and it
controls the other parts of the computer system. Located near the CPU
is primary storage, where data and program instructions are stored
temporarily during processing. Three kinds of buses link the CPU,
primary storage, and the other devices in the computer system. The data
bus moves data to and from primary storage. The address bus transmits
signals for locating a given address in primary storage, indicating where
data should be placed. The control bus transmits signals specifying
whether to read or write data to or from a given primary storage address,
input device, or output device. The characteristics of the CPU and
primary storage are very important in determining a computer’s speed
and capabilities.

5.1.2 Arithmetic-Logic and Control Unit

The arithmetic-logic unit (ALU) performs the computer’s principal logical
and arithmetic operations. It adds, subtracts, multiplies, and divides,

52
determining whether a number is positive, negative, or zero. The control
unit coordinates and controls the other parts of the computer system. It
reads a stored program, one instruction at a time, and directs other
components of the computer system to perform the program’s required
tasks.

5.1.3 Primary Storage

Primary storage has three functions. It stores all or part of the program
that is being executed. Primary storage also stores the operating system
programs that manage the operation of the computer. Finally, the
primary storage area holds data that the program is using. Data and
programs are placed in primary storage before processing, between
processing steps, and after processing have ended, prior to being
returned to secondary storage or released as output.
Internal primary storage is often called RAM, or random access memory.
It is called RAM because it can directly access any randomly chosen
location in the same amount of time. RAM is volatile: its contents will be
lost when the computer’s electric supply is disrupted by a power outage
or when the computer is turned off. ROM, or read-only memory, can only
be read from; it cannot be written to. ROM chips come from the
manufacturer with programs already built in, or stored. ROM is used in
general-purpose computer to store important or frequently used
programs, such as computing routines for calculating the square roots of
numbers.

Figure 5.1 Primary Storage & Secondary Storage

5.1.4 Secondary Storage

Most of the information used by a computer application is stored on
secondary storage devices located outside of the primary storage area.
Secondary storage is used for relatively long-term storage of data
outside the CPU. Secondary storage is nonvolatile and retains data even

53
when the computer is turned off. The most important secondary storage
technologies are magnetic disk, optical disk, magnetic tape.

Magnetic Disk
The most widely used secondary-storage medium today is magnetic
disk. There are two kinds of magnetic disks: floppy disks (used in PC’s)
and hard disks (used on large commercial disk drives and PC’s). Large
mainframe or midrange systems have multiple hard disk drives because
they require immense disk storage capacity in the gigabyte and tetra
byte range. PC’s also use floppy disks, which are removable and
portable, with a storage capacity up to 2.8 megabytes, and they have a
much slower access rate than hard disks.

Optical Disks
Optical disks, also called compact disks or laser optical disks, use laser
technology to store data at densities many times greater than those of
magnetic disks. They are available for both PC’s and large computers.
Optical disks can store massive quantities of data, including not only text
but also pictures, sound, and full-motion video, in a highly compact form.
The most common optical disk system used with PC’s is called CD-ROM
(compact disk read-only memory). A 4.75-inch compact disk for PC’s
can store up to 660 megabytes, nearly 300 times more than a high-
density floppy disk. Optical disks are most appropriate for applications
where enormous quantities of unchanging data must be stored
compactly for easy retrieval, or for storing graphic images and sound.
CD-ROM is read-only storage. WORM (write once/read many) and CD-
R (compact disk-recordable) optical disk system allow users to record
data only once on an optical disk. Digital video disks (DVD), also called
digital versatile disks, are optical disks the same size as CD-ROM but of
even higher capacity. They can hold a minimum of 4.7 gigabytes of data,
enough to store a full-length, high-quality motion picture.

Magnetic Tape
Magnetic tape is an older storage technology that still is used for
secondary storage of large volumes of information. More and more
organizations are moving away from using the old reel-to-reel magnetic
tapes and instead are using mass-storage tape cartridges that hold far
more data than the old magnetic tapes.

5.1.5Input Devices
An input device is a computer hardware component that converts input
data into a machine-readable binary code and transmits them to the

54
CPU, where they may be used in processing or may be sent to storage
for later use. The computer is useless without data to process. The input
of data is the first step in data processing operations and requires the
conversion of facts and figures in alphabetical and numerical form into a
form the computer can use. This, as we saw earlier, means converting
all data into the binary digits 1 to 0, which can be represented by
electrical impulses. Input devices gather data and convert them into
electronic form for use by the computer.
Keyboards remain the principal method of data entry for entering text
and numerical data into a computer. However, pointing devices such as
the computer mouse and touch screens, are becoming popular for
issuing commands and making selections in today’s highly graphic
computing environment.

Figure 5.2 Input Devices

Pointing Devices
A computer mouse is a handled device with point-and-click capabilities
that is usually connected to the computer by a cable. The computer user
can move the mouse around on a desktop to control the cursor’s
position on a computer display screen, pushing a button to select a
command. The mouse also can be used to “draw” images on the screen.
Trackballs and touch pads often are used in place of the mouse as
pointing devices on laptop PCs.

55
Touch Screens
It allows user to enter limited amounts of data by touching the surface of
a sensitized video display monitor with a finger or a pointer. Touch
screens often are found in information kiosks in retail stores, restaurants,
and shopping malls.

Source Data Automation

It captures data in computer-readable form at the time and place they
are created. The principal source of data automation technologies are
optical character recognition, magnetic ink character recognition, pen-
based input, digital scanners, voice input, and sensors.

Optical Character Recognition (OCR)

The devices translate specially designed marks, characters, and codes
into digital form. The most widely used optical code is the bar code,
which is used in point-of-sale systems in supermarkets and retail stores.
Bar codes also are used in hospitals, libraries, military operations, and
transportation facilities. The codes can include time, date, and location
data in addition to identification of data. The information makes them
useful for analyzing the movement of items and determining what has
happened to them during production or other processes.

Magnetic Ink Character Recognition (MICR)

This technology is used primarily in cheque processing for the banking
industry. The bottom portion of a typical cheque contains characters
identifying the bank, checking the account number, and cheque number
that are preprinted using a special magnetic ink. A MICR reader
translates these characters into digital form for the computer.
Handwriting-recognition devices such as pen-based tablets, notebooks,
and notepads are promising new input technologies, especially for
people working in the sales or service areas or for those who have
traditionally shunned computer keyboards. These pen-based input
devices convert the motion made by an electronic stylus pressing on a
touch-sensitive tablet screen into digital form. For instance, the united
parcel service replaced its driver’s clipboard with a battery-powered
delivery information acquisition device (diad) to capture signatures along
with other information required for pickup and delivery.

Digital Scanners
These translate images such as pictures or documents into digital form
and are an essential component of image-processing systems. Voice
input devices convert spoken words into digital form for processing by

56
the computer. Voice recognition devices allow people to enter data into
the computer without using their hands, making them useful for
inspecting and sorting items in manufacturing and shipping and for
dictation. Microphones and tape cassette players can serve as input
devices for music and other sounds.

Sensors
These are devices that collect data directly from the environment for
input into a computer system. For instance, farmers can use sensor to
monitor the moisture of the soil in their fields to help them with irrigation.

5.1.6 Output Devices

The major data output devices are cathode ray tube terminals,
sometimes called video display terminals and printers.

Figure 5.3 Output Devices

Cathode Ray Tube (CRT)

This is probably the most popular form of information output in modern
computer systems. It works much like a television picture tube, with an
electronic gun shooting a beam of electrons to illuminate the pixels on
the screen. It has more pixels per screen, the higher the resolution, or
clarity, of the image on the screen. Laptop computer use flat panel
displays, which are less bulky than CRT monitors.

Printers
These produce a printed hard copy of information output. They include
impact printers (such as a dot matrix printer) and non-impact printers
(laser, inkjet, and thermal transfer printers). Most printers print one
character at a time, but some commercial printers print an entire line or
page at a time. In general, impact printers are slower than non-impact
printers. High-quality graphics documents can be created using plotters
with multicolored pens to draw (rather than print) computer output.

57
Plotters are much slower than printers but are useful for outputting large-
size charts, maps, or drawings.

Voice Output Device

It converts digital output data into intelligible speech. For instance whe n
you call for information on the telephone, you may hear a computerized
voice respond with the telephone number you requested.
Audio output such as music and other sounds can be delivered by
speakers connected to the computer, microfilms have been used to
store large quantities of output as microscopic filmed documents, but
they are being replaced by optical disk technology.

Interactive Multimedia (Communications Devices)

The processing, input, output, and storage technologies described can
be used to create interactive multimedia applications that integrate
sound, full-motion video, or animation with graphics and text. Multimedia
technologies facilitate the integration of two or more types of media,
such as text, graphics, sound, voice, full-motion video, still video, or
animations, into a computer based application. Multimedia is becoming
the foundation of new consumer products and services, such as
electronic books and newspapers, electronic classroom presentation
technologies, full-motion video conferencing, imaging, graphics design
tools, and computer games. Many web sites use multimedia.

5.2 CLASSIFICATION OF COMPUTERS

Computers represent and process data the same way, but there are
different classifications. We can use size and processing speed to
categorize contemporary computers as mainframes, midrange
computers, PC’s, workstations, and supercomputers. Managers need to
understand the capabilities of each of these types of computers and why
some types are more appropriate for certain processing work than
others.
A mainframe is the largest computer, a powerhouse with massive
memory and extremely rapid processing power. It is used for very large
business, scientific, or military applications where a computer must
handle massive amounts of data or many complicated processes.
A midrange computer is less powerful, less expensive, and smaller
than a mainframe; it is capable of supporting the computing needs of
smaller organizations of managing networks of other computers.
Midrange computers can be minicomputers, which are used in systems
for universities, factories, or research laboratories; or they can be

58
servers, which are used for managing internal company networks or web
sites.
A personal computer (PC), which is sometimes referred to as a
microcomputer, is one that can be placed on a desktop or carried from
room to room. Smaller laptop PCs are often used as portable desktops
on the road. PCs are used as personal machines as well as in business.
A workstation also fits on a desktop but has more powerful
mathematical and graphics processing capability than a PC and can
perform more complicated tasks than a PC in the same amount of time.
Workstations are used for scientific, engineering, and design work that
requires powerful graphics or computational capabilities.
A supercomputer is a highly sophisticated and powerful computer that
is used for tasks requiring extremely rapid and complex calculations with
hundreds of thousands of variable factors. Supercomputers traditionally
have been used in scientific and military work, such as classified
weapons, research and weather forecasting, which use complex
mathematical models, but they are starting to be used in business for the
manipulation of vast quantities of data. Supercomputers use parallel
processing and can perform billions and even trillions of calculations per
second, many times faster than the largest mainframe.
5.3 HARDWARE TECHNOLOGY REQUIREMENTS FOR
ELECTRONIC COMMERCE AND THE DIGITAL FIRM
Electronic commerce and electronic business are placing heavy new
demands on hardware technology because organizations are replacing
so many manual and paper-based processes with electronic ones.
Companies are processing and storing vast quantities of data for data
intensive applications, such as video or graphics, as well as for
electronic commerce. Much larger processing and storage resources are
required to handle the surge in digital transactions flowing between
different parts of firms and between firms and their customers and
suppliers.
Although electronic commerce and electronic business may be reducing
the role of paper, data of all types (such as purchase orders, invoices,
requisitions, and work orders) must be stored electronically and
available whenever needed. Customers and suppliers doing business
hour of the day or night, and they demand 24-hour availability. For
business to occur 24hours a day anywhere in our electronic world, all
possibly relevant data must be stored for on-line access and all these
data must be backed up.

59
 Figure 5.4 Types of Computers

LET US SUM UP
Computer hardware technology constitutes the underlying physical
foundation for the firm’s information technology (IT) infrastructure. The
other components of it infrastructure-software, data, and networks-
require computer hardware for their storage or operation. The modern
computer system has six major hardware components: a central
processing unit (CPU), primary storage, input devices, output devices,
secondary storage, and communications devices.
CHECK YOUR PROGRESS
Choose the Correct Answer:
1_________ is not a primary storage device
a) RAM b) ROM

c) Compact disk d) DVD

2. ________ is a highly sophisticated and powerful computer that is
used for tasks requiring extremely rapid and complex calculations with
hundreds of thousands of variable factors.
a) Personal Computer b) Mainframe

c)Supercomputers d) Personal Computer

3. _________ uses laser technology to store data at densities many
times greater than those of magnetic disks.
a) Optical disks b) printers

c) Cathode Ray Tube d) Mainframe

4. ALU Stands for ___________

a) Arithmetic logic unit b) Arithmetic Functional Unit

c) Arithmetic legal unit d) Arithmetic lethal Unit

5. Technologies facilitate the integration of two or more types of media

a)Multimedia b) Workstation

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c) Super computer d) Software technologies

GLOSSARY

Hardware : Hardware is the physical

components of a computer such as
the machine and wiring, or tools and
machinery, or heavy military
equipment.

CPU : A central processing unit (CPU) is

the electronic circuitry within a
computer that carries out the
instructions of a computer program
by performing the basic arithmetic,
logical, control and input/output (I/O)
operations specified by the
instructions

Magnetic Disk : A magnetic disk is a storage device

that uses a magnetization process
to write, rewrite and access data.

Mainframe : A mainframe is a large

computer system designed to
process very large amounts of data
quickly

Midrange computer : A midrange computer is often used

as a server, which means it provides
storage, processing power, and
other functions to users connected
to it by a network.

Digital Scanners : An electronic device that generates

a digital representation of an image
for data input to a computer

Sensors : A sensor is a device that detects the

change in the environment and
responds to some output on the
other system.

61
SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) c 2) c 3) a 4)a 5)a

62
Unit 6

COMPUTER SOFTWARE
STRUCTURE

Overview

Learning Objectives
6.1 Evolution of Computer Software
6.2 Classification of Computer Software
6.2.1 Operating Systems
6.2.2 Control Programs
6.2.3 Service Programs
6.2.4 Programming Languages
6.2.5 Packaged Software
Let Us Sum Up

Glossary

Check Your Progress

Suggested Readings

Answers to check your progress

OVERVIEW
The purpose of computer software is to simplify the control of the
computer. Computer software includes system software and application
software. The managers should have basic understanding of computer
software and hardware so that they can make better decisions.

LEARNING OBJECTIVES

After reading this unit, you should be able to,

• trace the evolution of computer software
• categorize computer software
• familiarize with types of computers.
6.1 EVOLUTION OF COMPUTER SOFTWARE
The evolution of programming has paralleled the evolution of computer
hardware, since one depends upon the other. First generation software
utilized a certain amount of built in directions and instructions in the
hardware. The purpose of system software is to simplify the control of
the computer. System software functions as an intermediary between
the application programmer and user who communicates in words and

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numbers, and the computer, which response to electrical impulses. In
order to control a computer, two different types of system software are
needed. They are operating system and a programming language. Other
system capabilities, such as time sharing or data communications, also
may be required, depending on the application and the hardware
configuration. During the later stages of the first generation, assemblers
and compilers were developed in elementary form. Early instructions or
programs for the computer were in machine language, comprehensible
only to the computer for which they were designed. This form is rarely
used today, usually being replaced by symbolic coding which permits
simpler description of instruction to the machine.
In the late 1950’s, the potential of universal symbolic language was
obvious, that a number of attempts have been made to develop a
language. A number of such languages are in use today, each oriented
to certain specific characteristics or requirements. Languages such as
FAP and AUTOCODER were early languages, which had algorithmic
capabilities, but were basically machine or assembler oriented. Algebraic
languages, which could be readily prepared from algebraic expressions
or equations, such as ALGOL or FORTRAN, were developed for the
conversion of these expressions into computer instructions. FORTRAN
literally means formula translation and has been developed into an
accepted universal language capable of utilization on many computers.
Although excellent for conversion of mathematical terminology,
FORTRAN is not basically oriented towards business language. For this
reason, COBOL (common business oriented language) was developed
and is now perhaps the most broadly utilized universal language for
business application. Program is prepared in symbolic language; it is
processed by another program, the assembler, which converts the
symbolic instructions into a form suitable for execution on the computer.
Simultaneously, the assembler package can also review any errors and
provide other diagnostic information, even preparing graphic flow charts
if desired. The output of the assembler is written in absolute code, and
the symbolic language is replaced by either absolute or re-locatable
addresses.
When universal languages are utilized in preparation of a program, an
assembler is not used to convert the actual machine instructions. In this
case, a compiler program is utilized. As in the case of the assembler, the
compiler does transform the programs from a form easily read by
programmers into one capable of being read by the computer. However,
while the symbolic input program for the assembler is very dependent
upon the computer is being utilized, the compiler program is relatively

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computer independent. The second generation was the batch process,
in which input material was introduced, processing accomplished, and
output physically removed from the computer. Actually, this is stacked
processing, in which a series of jobs are introduced without operator
intervention. True dependent- and with proper choice of higher level
languages will run on other computers with only minimal changes. The
input program for both is called the source program, and the output is
termed the object deck.
Second-generation computers carried both assemblers and compilers to
a sophisticated level of development. The number of built in instructions
in equipment was generally reduced because of inflexibility. These
instructions were replaced by early operating systems, which had sets of
basic instructions, and input output, control systems-as well as
programs. The second generation was the batch process, in which input
material was introduced; batch processing involves the processing of a
stack of similar jobs, and the completing of the same phase across each
job, then returning to the second phase of each job in the batch. For
both stack and processing, however, simple operating systems are
useful.
Third generation computer makes the use of operating systems almost
indispensable for the largest- size machine. Without a machine operated
system, operator inefficiencies would greatly offset the higher cost of the
hardware. Operating systems have become increasingly complex,
including for families such as IBM 360 COS (Compatible operating
system-a series of programs which allowed emulation mode to operate
1401 programs on the 360); BOS (basic operating system- disc oriented
one of the early 360 operating systems, no longer used); DOS (disc
operating system); TOS (tape operating system); and TSS (time sharing
system).
The most comprehensive operating system for the IBM 360 series is
OS/360. This is tremendously flexible system with largest configuration
of this series, spanning a range from the model 50 upward. Initially,
OS/360 had been intended to service the entire range of IBM 360’s, but
the system itself requires a substantial memory dedication- exceeding in
some cases 128k. In addition, the OS requires substantial peripheral
equipment in memory to properly utilize its dynamic capabilities.
Accordingly, model 360/50 is one of the smallest to utilize the OS, and
its utility becomes much greater as the systems increase in size. OS/360
has a modular organization, so that the system can be implemented in
several versions to various levels of sophistication. The system utilizes a

65
job control language offering great flexibility over operation of the
machine. OS/ 360 has a definite data management structure, which is
flexible, but dependable. Accordingly, the programmer is able to utilize
the characteristics of OS/360 to enhance the capabilities of the program,
while reducing its overall size. While OS/360 is perhaps the most widely
known operating system, other computers have had similar operating
systems developed for optimal utilization of their hardware.

Evolution of Computers

Figure 6.1 Evolutions of Computers

During the first generation, software was so elementary that it cost less
than 10 percent of the combined hard ware-setup charge. During the
1960’s this increased to as much as 50percent of the package set up
cost. The software portion of the picture is increasing and software costs
will continue to absorb more and more of the overall system costs.
There has been an unfortunate on implication on the part of many
sources that the availability of larger capacities somehow result in lower
soft ware costs, or at least bring about less dependence upon soft ware.
Typical of these allegations is the description of a terminal in every
manager’s office, and therefore of less demand upon programming.
Upon examination, this falls apart. The software required operating the
basic computer calculation is still basically the same as it always was.
Compilers and assemblers is also software and require constant
improvement, even though they continually give better results. The
operating systems are highly complex, and also require maintenance
and improvement. Finally, the introduction of the remote aspect (i.e.,
terminals) results in a tremendous software requirement for the
communications transfer of information and interface with the computer.
Unfortunately, experience thus far-as could have been predicted is that
the simpler the man-machine interface (in terms of the man’s view), the

66
more difficult the programming to accomplish it. That is, if management
chooses to speak directly to the computer in reasonably pragmatic
English, the programming implications are fantastic. While this is within
the realm of the state-of-the-art, it usually produces completely
unacceptable cost levels. While it is possible that the continual
development of larger machines will ultimately permit a breakthrough in
terms of direct communication with the equipment, the overhead for this
software master operating system will be substantial-and perhaps too
expensive for general use. Further, when such a system is developed, it
will be operable only on the new and ultrahigh-capacity equipment and
this will preclude use on current third-generation equipment.
Accordingly, the economic implications of utilization of the yet-to-be
developed utopian system will have to pass another economic barrier.
From the practical viewpoint, management should consider the cost of
programming in terms of what is relatively available today, and not look
toward pie-in-the-sky developments many years down the road. Actually,
the programming situation is improving-in step with hardware. As
hardware is becoming more modular, and higher-Level languages are
becoming truly interchangeable; the package program has become
practical in many areas. For many portions of MIS, it is possible that
substantial portions of the program may be prepared in a generalized
form.

6.2 CLASSIFICATION OF COMPUTER SOFTWARE

The Computer software is classified into systems software and
application software. Examples of system software are the operating
system which directs and assists the execution of application programs,
utility programs which do common tasks such as sorting, compilers
which translate programs coded by the programmer into machine-level
instructions, and data base management system which manage storage
and access to data bases. System software is required for data
communications. System software is usually purchased rather than
developed by internal personnel. The operating system is sometimes
included in the price of the hardware and provided by the hardware
vendor. Database management system software is usually purchased
separately, either from the hardware vendor or from independent
software vendors.
Application software is usually referred to simply as programs or codes.
This may use hundreds of different programs to process pay, maintain
inventory records, schedule productions, analyze sales, aid decision
making, and otherwise support the managerial and operational activities

67
in an organization. Application software may be developed uniquely for
the using organization by in- house (or contractual) personnel or it may
be purchased in ready-to-use packages. Application software includes
computer programs written for an individual application such as payroll
processing or personal skill analysis. They generally require system
software in their execution. For example the application program specify
reading data from a record stored on a disk; the operating system
provides the instructions to manage the physical reading of the record
from disk storage

Figure 6.2: Classification of Computer Software

6.2.1 Operating Systems

Each different computer, or, in the case of microcomputer, each different
microprocessor, requires a unique set of binary codes to make it
function. Operating system converts more or less standard instructions
into these unique codes to make the operation transparent to the
programmer or user. That is, the programmer or user is unaware of the
peculiar requirements of the computer. For example, control program/
microcomputers is a popular microcomputer operating system. The
apple control program / microcomputer will translate the application
program into a code understood by its 6502 micro processor and the
Tandy control program / microcomputer will translate the same program
into a code understood by its Zilog 80 microprocessor. The compatibility
problem is not quite as simple as this example might indicate, however,
since there are often several versions of an operating system.
The purpose of an operating system is to make the job of the
application- software programmer easier. This is especially evident in
the one function of operating system just discussed- that of translating
application programs in to binary code. The operating system also
includes programs that relieve programmers of the responsibility of

68
including routine, repetitive, or purely ‘’housekeeping’’ functions in
application programs. Control programs and service are two types of
such systems software.

Figure 6.3 Operating Systems

6.2.2 Control Programs

Control program manages the input, output, and storage of data required
by application programs. These programs are concerned with the actual
physical location of data as well as with the logical and hierarchical
relationships (data elements, records, and files) that determine the
organization of data in storage. Control programs schedule input and
output according to assigned priority of, standing instructions. They also
maintain logs on the machine and peripheral time required for various
applications and/ or accounts. This latter function is especially important
when the computer center is operated as a profit center and must bill
other departments for services rendered. Control programs account for
one-third to one -half of the processing required for a typical business
application.

6.2.3 Service Programs

Service programs provide commonly used routines that might otherwise
have to be included in the application software. For example, it is often
necessary to sort data according to alphabetical or numerical sequence
or to merge two sorted data’s set into a single sequential list. Many

69
operating systems permit the application programmer to call up a service
program to perform these tasks with only one or two statements.
There are also service programs in operating systems to reformat data
for a different medium (e.g., from tape to disk) and to detect errors in
application programs. System software can detect only syntax errors. It
cannot detect logical errors-programming statements that follow all the
rules but have been used in a manner that will produce the desired
output.

6.2.4 Programming Languages

It has already been noted that systems software provides an interface
between the words and numbers used by programmers and the binary
code used by the computer. The systematic set of procedures and rules
governing the use of such words and numbers is called a programming
language. Programming languages are classified as machine,
assembler, or high level. These classes are also called first, second, and
third generation, respectively, to acknowledge both their relative age and
sophistication. In this vein, some recent, very sophisticated high-level
languages are called fourth generation in recognition of the advances
they represent over other, third generation, high level languages.

Programming Languages

Figure 6.4 Programming Languages

Machine Languages
The first generation of computer languages is called machine language
because they use the binary code—1’s and 0’ s—understood directly by
the computer and do notion fact require the services of an operating
system. Machine language instructions are typically in two 4 and 5 - bit
parts: an operation code, which tells what is to be done, and an operand,
which tells where to store the results. For example, a machine language

70
code to “store a value called x in register 11011” might be written 1100
11011. Although, technically speaking, machine languages are in binary
code, most computers accept the decimal (base 10) or hexadecimal
(base 16) equivalents of these codes. Languages using non-binary
equivalents are still referred to as machine languages.
Every computer has its own more or less unique machine language,
which is determined by the A.L.U circuitry. All computers ultimately
operate in machine language, but almost none still require the
programmer to use one. Instead, system software translates other,
easier-to-use languages in to machine languages.

Assembler Languages
The second generation of computer languages freed the programmer
from the tedious, error -prone binary instructions and was the first to
require an operating system. This generation is called assembler, or
sometimes, symbolic languages. Assembler languages substitute short
alphabetic expressions for the operation code. For example, add x
means add the variable previously defined as x to the value currently
stored in an accumulator register.
Although not strictly a machine language, most assembler are
nonetheless machine- oriented. That is, each computer has unique
assembler language symbolic expressions that correspond to machine
language instructions on a one- to-one basis. A portion of the operating
system known as a language translator performs the conversion of
symbolic instructions into machine language instructions.
Some assembler languages use macroinstructions that generate two or
more machine language instructions from a single assembler language
statement. For example, the macro instructions add a, b, c which means,
add the variable a to the variable b and call the result c,” replaces three
simple instructions to load a into a register, add b to it and store the
result.
An exception to the general rule of unique assembler languages is found
in the very recent (1983) language c. The language c is sometimes
described as a “portable” assembler language because there are
versions of it available for many computers, from micros to super
computers. C is very powerful language used most often by system
programmers for writing system software.

71
High Level Languages
The third generation of computer languages is called high level and was
the first to free programmers from specific hardware requirements,
although there were (and often still are) minor differences in high level
languages among the various makes and models of computers.
In compiling high level or source program it is translated entirely into a
machine language or object program prior to execution. Interpreters
translate and execute one program statement at a time. Until recently,
most high level languages were compiled for more efficient use of C.P.U
time. Now, however the extremely high speeds of the latest computer
hardware and certain inherent advantages to interpreting have spurred a
renewed interest in interpretive languages. Many fourth-generation
languages are of the interpretive variety.
High level languages may also be classified as procedure- oriented or
problem-oriented.

6.2.5 Packaged Software

At one time, in house development was the normal approach to the
automation of standard business applications. However, as competition
in the computer industry grew, manufacturers began to offer application
software and other services to make their products more attractive. And
as the number of computer users grew, they soon constituted so large a
market that “third-party” (other than the manufacturer or the user) firms
found it profitable to develop and market application software. Today a
user who wishes to purchase a software package can choose from
among thousands of programs written for dozens of different application
areas and virtually every make, model, and size of computer.
The sets of computer program instructions that direct the operation of
the hardware are called software. A set of instructions for a special task
is termed a routine; a complete set of instructions to execute a related
set of tasks is a program. Software instructions are termed code.
Software programs vary widely in size. For example, a very simple
application program may consist of a few hundred lines of instructions in
programming language, while the larger application program or system
software program may consist of tens of thousands of lines of
instructions.
An application system consists of a set of programs and related manual
procedures to accomplish information processing. The cost of
developing a large application system can be very high.

72
The main advantage of developing a system ”in house” is to obtain a
unique system designed to fit specific needs of an organization. In many
cases, it is more appropriate to lease or buy application software. There
is a growing trend toward purchasing generalized application packages
(such as payroll, accounts receivable, production scheduling) and using
internal development personnel to tailor the packages to unique
organizational needs. Application packages are sold or leased from
companies, which specialize in software development; application
packages for small (personal) computers are sold in computer stores, by
mail, and other similar channels.

Activity 1
When you buy personal productivity software, we recommend that you
do so in the form of a suite. A software suite is bundled software that
comes from the same publisher and costs less than buying all the
software pieces individually choose one personal productivity suite either
from Microsoft office or coral we perfect office. Determine the individual
price for each piece of software included in it. Now, perform a price
companion. How much cheaper is the entire suite? Can you think you a
situation in which someone would buy the individual pieces as opposed
to the entire suite? If so, please describe it.

LET US SUM UP
The computer software is classified into systems software and
application software. A computer is directed by software instructions.
Most programming of instructions is done in high level languages which
trade off programmer productivity against extra machine resources and
numbers of types of high-level languages used in information processing
applications are also described.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1. _________ language because they use the binary code—1’s and 0’

a) Machine language b) Assembler Languages

c) High level language d) Low-Level languages

2. ____________converts more or less standard instructions into these
unique codes to make the operation transparent to the programmer
or user.

a) Operating system b) control system

c) Service system d) logical system

73
3. _________ referred to simply as programs or codes.

a) Customized software b) system software

c) Application software d) Paid software

4. The third generation of computer languages is called _____________

a) Machine language b) Assembler Languages

c) High level language d) Low-Level languages

5. Symbolic languages are also called as ___________

a) Machine language b) Assembler Languages

c) High level language d) Low-Level languages

GLOSSARY

Workstation System software : Workstation, a high

performance computer system that
is basically designed for a single
user and has advanced graphics
capabilities, large storage capacity,
and a powerful microprocessor.

Optical Disks : An optical disk drive (ODD) uses a

laser light to read data from or write
data to an optical disc.

Application software : Application software, or app for

short, is software that performs
specific tasks for an end-user.

Pointing devices : A generic term for any device (e.g. a

graphics tablet, mouse, stylus, or
trackball) used to control the
movement of a cursor on a
computer screen.

Operating systems : An operating system, or "OS," is

software that communicates with the
hardware and allows other
programs to run.

Touch screens : A touch screen is a computer

display screen that is also an input
device. The screens are sensitive to

74
 pressure; a user interacts with the
computer by touching pictures or
words on the screen.

Assembler : An assembler is a program that

converts assembly language into
machine code. It takes the basic
commands and operations from
assembly code and converts them
into binary code

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) a 2) a 3) c 4) c 5) b

75
Unit 7
DATABASE MANAGEMENT SYSTEM
STRUCTURE

Overview

Learning Objectives

7.1 Database Concepts

7.2 Database Models

7.2.1 Hierarchical Database Model

7.2.2 Network Database Model

7.2.3 Relational Database Model

Let Us Sum Up

Glossary

Check Your Progress

Suggested Readings

Answers to check your progress

OVERVIEW
In the previous unit, we had discussed the hardware and software
components of Computer. Database Management System is one of the
software components of Computer. More specifically it is the application
software. The features of database management system are discussed
here. Database management system is classified into hierarchical,
network and relationship database management system. Internet
applications are explained at the end of this unit.
LEARNING OBJECTIVES

After reading this unit, you should be able to,

• discuss database concepts
• classify database management systems
• explain the applications of internet.

7.1 DATABASE CONCEPTS

• Database concepts is rooted in an attitude of sharing common data
resources
• Releasing the control of those data resources to a common
responsible authority.

76
• Cooperating in the maintenance of those shared data resources.

If data is a valued, shared resource in the organization, it must be

managed like any other asset such as men, materials, machines and
money. Management in its fullest sense involves the establishment of
appropriate organizational arrangements and the institution of system-
based tools and procedures. A Database Management System (DBMS)
is a software system that manages the creation and use of databases.
All access to the database is through the database management
software; and access language facilities are provided for application
programmer users and end users who formulate queries. Thus,
application programmers define a user schema or user view as a logical
model of the data to be processed by the application program. The
programmer writes instruction using a programming language interface
to the database management system, which handles the translation to
internal schema of physical storage. All data validation and authorization
checks of user authority to access a data item are handled through the
DBMS. A person wishing to access the database for a query or special
report uses a database query language to formulate the request and
format the output. Thus, the database management system may be
viewed as the only door to the physical storage of data in the database.
The database administrator is the person who has authority over
definition and use of the database.
DBMS greatly facilitate the physical implementation of a logical design.
Thus DBMS is a set of computer programs that controls the creation,
maintenance, and use of the databases of users and computer-using
organizations. It allows different user application programs to easily
access the same database. A DBMS also simplifies the process of
retrieving information from databases in the form of files and records.
Instead of having to write computer programs to extract information,
users can ask simple questions in a query language. Thus, many DBMS
packages provide fourth generation languages and other application
development programs.
A DBMS can be envisioned as an additional layer of software between
file-access software and application programs. Ideally, DBMS software
provides data independency, which provides data for different
applications where the applications access the data of different purposes
by using different search strategies. Computer program independence,
which allows application programs to be coded in different languages
and allows for modification of a database without requiring modifications
to application programs unless specific data elements or data structures
used by the applications program are modified.

77
A DBMS reduces the complexity of application programs. They no
longer have to cope with the physical locations and structures of the files
and records. With a DBMS, any data element or combination of data
elements can be used to index a group of data from a record or records.
The DBMS, in conjunction with the file-access software, handles the
necessary logistics of retrieving and storing specified data elements in
the proper physical locations within the database.
Many vendors and software companies offer sophisticated
advancements to their DBMS software packages in the form of query
languages. A “query language” is a set of easy-to-use computer
instructions. These instructions are designed to allow a person who is
not trained in computer programming to retrieve, modify, add, or delete
selected data elements on the basis of stated conditions.
The use of query languages or fourth generation languages becoming
increasingly popular because of the proliferation of computer terminals,
personal problems, ad hoc retrieval requests from all levels within an
organization, and the ever-improving software packages readily
available for most user applications. Such advancements place the
computer in the hands of the user and help remove the aura of mystery
that surrounds computers.
Thus, a DBMS allows the users of a database to view the database in
terms of applications necessary to support their departmental or
functional area. Their access to the database is not complicated by other
data elements in the database. This means that data elements can be
added to or deleted from the database without affecting any application
programs other than those that use the data elements being added or
deleted. A DBMS greatly reduces the difficulty of both establishing and
modifying integrated files.
Advantages of a DBMS
• Complexity of the organization’s information system environment
can be reduced by central management of data, access,
utilization, and security.
• Data redundancy can be reduced by eliminating all of the
isolated files in which the same data elements are repeated.
• Data confusion can be eliminated by providing central control of
data creation and definitions.
• Program-data dependence can be reduced by separating the
logical and physical aspects of data.
• Program development and maintenance costs can be radically
reduced.

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 • Flexibility of information systems can be greatly enhanced by
permitting rapid and inexpensive ad hoc queries of very large
pools of information.
• Access and availability of information can be increased.
• Security and privacy can be controlled.

Disadvantages
• Costs are high.
• Security is difficult to maintain.
• A consequence of security breaches may be severs.
• Greater control over data is required.

7.2 DATABASE MODELS

The major database models used in the industry are as follows:

1) Hierarchical data model

2) Network data model

3) Relational data model

7.2.1 Hierarchical Database Model (HDBM)

A hierarchical view of data base model is like an organizational chart. As
an example, this view is useful for a bill-of-material application in
manufacturing where an inventory must be kept of all the components
and sub-assemblies necessary to manufacture a product. This present
data to users is a tree-like structure. Within each record, data elements
are organized into pieces of records called segments. To the user, each
record looks like an organization chart with one top-level segment called
the root. An upper segment is connected logically to a lower segment in
a parent-child relationship. A parent segment can have more than one
child but a child can have only one parent.
In the HDBM the data is stored in the hierarchical form recognizing the
fact that each of the levels is bounded by the parent-child relation to the
earlier level. The typical characteristics of the HDBM are:

1) HDBM starts with a root and has several roots.

2) A root will have several branches.

3) Each branch is connected to one and only one root.

4) A branch has several leaves and a set of leaves are connected
to one branch.

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 Figure 7.1 Hierarchical Database Model (HDBM)

7.2.2 Network Database Model (NDBM)

Network DBMS is a variation of hierarchical DBMS. Indeed, databases
can be translated from hierarchical to network and vice versa in order to
optimize processing speed and convenience. Whereas hierarchical
structures depict one-to-many relationships, network structures depict
data logically as many-to-many relationships.
Database integrity is used in its broadest sense to imply the
completeness, soundness, purity, veracity and confidentiality of data.
Database integrity involves:
Protecting the existence of the database through physical security, and
backup and recovery measures.
Maintaining the quality of the database through input validation,
diagnostic routines to ensure that the data always conforms to its
definition, and controlling processes which update the database.
Maintaining the privacy of the stored data through isolation, access
regulation, encryption, and monitoring.
The NDBM interconnects the entities of an organization into a network.
The data model is shown by an arrangement of the blocks. The block
represents an entity or a record. The collection of the blocks is called as
the area of database. The NDBM uses the blocks, the area and the
arrows to represent the database of the organization. The method,
popularly known as the Bachman’s diagram was suggested by
Mr.C.W.Bachman.
The NDBM deals with the set and the records. A component, a part, a
subassembly and an assembly area are the records. A record located at
the tail of the arrow is known as a member record, and a record at the
head of the arrow is known as an owner. An arrow connecting the owner
to a member is a set. For example, the component in the part is a set.

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 The set may have more than one member occurrence, i.e., a
component may be used in more than one part. The same is true for the
part subassembly set and subassembly-assembly set, and so on. Every
owner is a member besides being the owner and also is a member of
the set. If all the relationships are to be shown, then the model is
equivalent to a network. Hence, the data model is known as the NDBM
Simple Network Data Base model

Figure. 7.2 Simple Network Data Base model

NDBS with an example

Figure 7.3 NDBS

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7.2.3 Relational Database Model (RDBM)
In the RDBM, the concept of two dimensional tables is used to show the
relation. For example, consider the following database having the
component name and the component number in the table form.

Component Number Component Name

100 Washer

102 Nut

109 Bolt

111 Screw
RDBM model uses theories of relational algebra in representing the data
in various tables. In RDBM, the relation is shown in a table; attribute is
shown in the column and record in the row of the table. The values of
attributes are taken from a domain. The set of attributes is record and
the record is identified by a unique key known as the primary key.
Latest RDBMS
The latest RDBMS allows an on-line maintenance, rapid recovery and
software-based fault tolerance. These features ensure the availability of
the database round the clock as the database maintenance is possible
on-line when the system is in use. The maintenance activity consists of
the following tasks:
a) Backup
b) Diagnostics
c) Integrity changes
d) Recovery
e) Design changes
f) Performance tuning
The rapid recovery feature allows the system administrator to provide a
’time’ to go back for recovery of the data if the system fails due to the
power failure or network crash. Based on this, time system automatically
goes back and collects all the changes and writes to the disk.
The characteristics of the modern RDBMS includes hardware
independence, software independence, workability under a client-server
architecture, a control feature of integrity, security and autonomy and
built-in communication facilities to achieve and open the system feature
for the MIS. It, therefore, provides a very efficient and effective tool to a
skillful designer, developer and user for handling the information needs
of the business enterprise. Eifcodd prescribes 12 rules to determine how

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relational a DBMS product is. If these twelve rules are satisfied, the
DBMS product is fully relational. The rules are as under:
1. The information rule

2. The guaranteed access rule

3. Systematic treatment of null values.

4. Active on-line catalog based on the relational model.

5. The comprehensive data sub-language rule.

6. The view up-dating rule.

7. High level insert, up-date, and delete

8. Physical data independence.

9. Logical data independence

10. Integrity independence

11. Distribution independence

12. The non-subversion rule.

These rules can be explained as follows:

Information Rule
Information in database is represented by values in column positions
within rows of tables and this is the only way it can be done.

Guaranteed Access Rule

Every individual scalar value in the database is uniquely addressable by
a primary key, containing table, column and row identities.

Systematic Traditional of Null Values

Missing or inapplicable information is termed as null value which is
distinct from zero. DBMS should provide systematic method of handling
null values in contrast to value zero.

Active on-line Catalog

The DBMS supports on-line catalog accessible to authorized users.

Sublanguage Rule
DBMS must support one relational language which helps data definition,
manipulation security, integrity constraints, and begin, commit, and
rollback operations.

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View update Rule

All possible views must be updateable by the system.

High level ‘Insert, Update, and Delete’

DBMS must support all the three at a time required by the three different
operators.

Physical Data Independence

It does not matter for the application how data is physically stored in
database.

Logical Data Independence

The data store and its application is not determined by the logic applie d
in use of data.
Integrity Independence
Integrity or rules of constraints must be possible to handle without
affecting the application.

Distribution Independence

DBMS should function with no error even though the data is distributed.

Non-Subversion Rule
A low level interface provided by the DBMS should not subvert the
system’s relational security or integrity constraint.
Advantages of RDBMS against HDBMS and NDBMS
Some of the major advantages of RDBMS against HDBMS and NDBMS
are:

Scalable high performance.

System-based integrity, security and autonomy.

Longer availability of time to the users.

Handles simultaneously the multiple RDBMS.

LET US SUM UP
Database Management system is a software system that manages the
creation and use of databases. It may be hierarchical, network or
relational. Distributed systems have computers located at various
physical sites at which organization does business and these computers
are linked by telecommunication lines in order to support some business
processes. Internet is often referred to as the network of networks which
has a wide range of applications.

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CHECK YOUR PROGRESS

Choose the Correct Answer:

1. An upper segment is connected logically to a lower segment in a

parent-child relationship _________

a) Hierarchical data model b)Network data model

c)Relational data model d) Information System Model

2. Network structures depict data logically as many-to-many
relationships.___________

a) Hierarchical data model b)Network data model

c)Relational data model d) Information System Model

3. Set of attributes is record and the record is identified by a unique key
known as the primary key.____________
a) Hierarchical data model b) Network data model

c) Relational data model d) Information System Model

4. A tree-like structure is found in______________

a) Hierarchical data model b) Network data model

c) Relational data model d) Information System Model

5. _________ is used in its broadest sense to imply the completeness,
soundness, purity, veracity and confidentiality of data.

a) Database integrity b) Database piracy

c) Database privacy d) Database security

GLOSSARY

Distributed system : A distributed system, also known

as distributed computing, is
a system with multiple components
located on different machines that
communicate and coordinate actions
in order to appear as a single
coherent system to the end-user.

Domain name : A domain name is a unique name

that identifies a website. For
example, the domain name of the
Tech Terms Computer Dictionary is

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 "techterms.com."

Local area networks (LAN) : "Local Area Network" A LAN is

a network of connected devices that
exist within a specific location. LANs
may be found in homes, offices,
educational institution, or other
areas.

Internet : The Internet is a vast network that

connects computers all over the
world. Through the Internet, people
can share information and
communicate from anywhere with
an Internet connection

Minicomputer : Minicomputer, Computer that is

smaller, less expensive, and less in
size but more powerful than
a mainframe or supercomputer, but
more expensive and more powerful
than a personal computer

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) a 2) b 3) c 4) a 5)a

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Unit 8

DISTRIBUTED SYSTEM
STRUCTURE

Overview

Learning Objectives

8.1 Distributed System

8.1.1 Characteristics of Distributed System

8.1.2 Distributed System Architecture

8.1.3 Reasons for Designing Distributed System

8.1.4 Advantages and Disadvantages of Distributed System

8.2 Internet

8.2.1 The Domain Name System

8.2.2 Internet News Group Organization

8.2.3 Features of Internet

Let Us Sum Up

Glossary

Check Your Progress

Suggested Readings

Answers to check your progress

OVERVIEW
In the previous unit the features of database management system were
discussed where Database management system is classified into
hierarchical, network and relationship database management system.
The significance of distributed system and Internet applications are
explained in this unit.
LEARNING OBJECTIVES

After reading this unit, you should be able to,

• discuss distribution system in detail
• classify database management systems
• explain the applications of internet.

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8.1 DISTRIBUTED SYSTEM
It is an application system in which the processing power is distributed to
multiple sites, which are then tied together via telecommunications lines.
Distributed systems have computers (of same size) located at various
physical sites at which the organization does business, and these
computers are linked by telecommunications lines in order to support
some business process. This system is the most commonly used
architecture for workgroup computing.
A distributed system interconnects locations that have computer
capability to capture and store data, to process data, and to send data
and information to other systems. The range of computing capabilities
varies. Some locations use terminals, other microcomputers, and still
others large computer systems. There is no requirement that all
equipment be from the same manufacturer. In fact, it is expected that
several makes of autonomous hardware will be involved. This allows
users to have the type of equipment most suitable for their needs.
All locations in distributed processing are called as nodes. They have
the ability to capture and process data where events are occurring. That
is, if a specific location uses a minicomputer, users enter data and
process it on their minicomputer. They receive rapid responses to
inquiries, store data in the system, and prepare reports as the need
arises. However, they can also transmit data or reports from their system
to another one linked into the network, the collection of interconnected
systems.
Large organizations are establishing networks to interconnect multiple
sales and manufacturing locations. Sales, accounting, and technical
information are readily accessible from multiple locations. Even word-
processing facilities are linked into the network. Corporate management,
at the top of the network, is able to interact with other locations in the
network while having its own independent information system. At the
same time, terminals at field sales offices are able to access information
in the system.

8.1.1 Characteristics of Distributed System

Distributed processing is closely linked to the communication of data. In
fact, a data communication system is the backbone of distributed
processing and the resource that makes it workable. But communication
is only one feature of distributed processing.

A distributed processing system includes:

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Multiple general-purpose processing components
The processing systems can be assigned specific tasks on a
dynamic basis. The systems need not to be of a common make or size.

High-level operating system

Individual processing nodes have their own operating systems that
are designed for the specific computer. But there is also a network
operating system that links together and integrates control of the
distributed components.

Physical distribution of components

Individual computers and processing units are physically
separated. They interact with one another through a communications
network.

System transparency
Users do not know the location of a computer in the distributed
system or anything about its manufacturer, model, local operating
system, speed or size. All services are requested by name. The
distributed operating system performs all activities involving physical
locations and processing attributes in order to satisfy the user’s request.

Dual component roles

Individual processing components can operate independently of
the distributed system framework. Yet they can be brought in as an
integral element in the meeting of a network user’s needs.
These characteristics stress the independence of the components in a
distributed environment. Individual elements are not permanently linked
to the network, as may be the case in communications networks.
Excluded from classification as distributed processing systems are the
following:
• A multifunction mainframe that distributes processing between
separate input/output and peripheral processors.
• A front-end processor that controls communications functions for
the system to which it is attached.
• A collection of remote terminals that collect and transmit data to a
host system.
• The interconnections of multiple host computers that transmit
messages and perform dedicated functions and tasks.

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 • A personal computer that can be partitioned, i.e., able to operate
several different processing sessions simultaneously by using a
special operating system.
• Although these applications can be quite useful, they do not meet
the definition of a distributed processing system.

8.1.2 Distributed System Architecture

In the distributed system architecture multiple, independent CPU are
connected to each other via communications lines. Each CPU
represents processing power, each terminal device represents power to
enter and retrieve data, each input device represents power to input
data, and each output device represents the capability to receive output.
All these devices can be grouped in one location (centralized); they can
also be dispersed, so that the power is distributed in different locations.
There are a number of variations of distributed systems depending on
the distribution of hardware and data:
• Separate computer system in each location

• Each system has own data

• Systems share data

• Systems share data managed by a designated computer

• Central computer with

• Input/output devices in other locations connected to central

computer
• Data preparation and data equipment at other locations
When physically separated computers are interconnected through
communication facilities, the configuration is called distributed
computing. Distributed computers may be organized as a hierarchy or a
ring. A hierarchy of processors is shown in the figure. The lowest level of
processor consists of microcomputers or minicomputers which has some
local data storage and perform local processing. Tasks too large to be
processed in this level or requiring data not available in the local
database are transmitted to a higher level regional or centralized
computer. The highest level in the hierarchy of process has the capacity
to handle large-scale problems.
Alternatively, there may be ring structure of minicomputers of equal
power and a large central processor. Each minicomputer does local
processing and access data from the other locations as required. The

90
way a distributed processing system is configured usually depends on
the needs of the application.
Local area networks (LANs) are the most prevalent form of distributed
systems for workgroup processing. A LAN connects independent
microcomputers by using cables and processor cards that are inserted in
the expansion slots of the micros. For some systems, the cables are
telephone-type wire; with others, coaxial cable (cables used for tv) is
required. In general, the microcomputers must reside within several
thousand feet of each other. The LAN supports hardware sharing, e-
mail, and workgroup database processing. It connects five user
microcomputers with a special microcomputer called a file server. The
file server contains the database on its disk and processes that
database in accordance with the requests from the other
microcomputers. It also schedules and supervises the processing of
requests for the graphics plotter.
Suppose a company maintains three ware houses in geographically
separated locations. All of the micros in a ware house are connected via
a LAN. Most of the time, the users of the micros need only to
communicate with other micros at the same site. Upon occasions,
however, it is necessary for a micro to communicate with another micro
in a different ware house. Wide area networks are basically networks of
LAN. In general, the system is designed so that micros that need to
communicate frequently are attached to the same LAN. The
independent LANs can communicate however, so that it is possible for a
micro on one LAN to communicate with a micro on another LAN. The
computers that connect the LAN together are called as gateway
computers.
Besides LAN and wide area network, a third network alternative is the
private branch exchange (PBX). A modern PBX is an extension to the
older telephone oriented switching systems. Such PBXs allow for the
transmission of data as well as voice signals and thus provide a medium
for microcomputers to communicate. Most PBX systems provide far less
data transmission capacity than a LAN, and so they currently are used
for low-volume applications such as e-mail.

8.1.3 Reasons for Designing Distributed System

i)Local Processing With Communications Capability

Analysts design distributed systems when it is desirable or necessary to
capture and process data locally but also to communicate with other
locations. For example, data transactions occurring during the day can

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be captured by direct entry into a microcomputer or a terminal connected
to a minicomputer and stored on magnetic disk. At the end of the day,
summary reports on transactions that have occurred are printed, but the
stored transaction data remain on disk. Changes and corrections to
transactions are made as they appear necessary after the transaction
register is scanned. If the system is, for example, a retail system, the
transaction files can be processed at the end of the month to produce
monthly statements for mailing to customers. At the same time,
customer accounts are updated to show new purchases, payments,
credits, and adjustments and to produce a new account balance, all of
which happens at the local level. Periodically throughout the month,
information on inventory levels can be sent to a central system at the
regional ware house that handles all purchasing of merchandise for the
firm. This process can be performed daily, weekly, or at whatever time
interval management finds appropriate.
At the end of the month, the national and regional sales offices receive
reports generated by the local system that summarize sales, inventory,
payments, and accounts receivable information. In this way the central
office receives all the information it needs, while the local offices are
able to capture and process operating data in the manner best suited to
their activities.

ii) Linking Different Makes of Equipment

There are few limits on the brands of equipment necessary to operate in
a distributed environment. The size of the system needed can vary
dramatically between nodes in a common network. Even the software
will be different. In this way, local operations can be tailored to their own
unique characteristics.
At the same time, through communications capabilities, the data or local
processing results can be transmitted throughout the network to other
systems of different sizes or even those made by other manufacturers.

iii) Sharing Loads

An important advantage of distributed systems is the ability to share
work between sites. Load sharing permits one site to transport data to
another node, through communication lines, and have it processed here.
The results are stored at the remote site and recalled to the originator
when the system is free.
Load sharing also provides operating reliability by ensuring that other
equipment is available for use if the local system is inoperable.
Processing can be done elsewhere in the network and results retrieved

92
when the system is again running. Sometimes a terminal is kept on hand
to link with other systems when the local computer system is unusable.

iv)Sharing Software
Sometimes software is the reason for developing distributed systems.
Some software packages run only on certain makes or sizes of
equipment. Budget constraints may also prohibit one site from
purchasing expensive software packages. However, if another site in
network has a specific package on its system, user in a distributed
system are usually able to run the software. Software sharing permits a
remote user to access the computer system to another node, enter data,
and have it run on the remote computer, using the software stores on
that system. As the results are generated, they are stored and later
downloaded (transmitted back) to the originating system.

8.1.4 Advantages and Disadvantages of Distributed System

Advantages of Distributed System

Increased service and responsiveness to local users.

Improved local morale because of local involvement.

Ability to adapt to the organizational structure.

Less vulnerable to downtime or catastrophe at central site

Increased manageability because the pieces of the system are

smaller.

Reduced computing cost

Disadvantages of Distributed System
Very dependent on high quality telecommunication lines, which are
quite vulnerable
Utilizes technologies those are relatively new and not well
understood.

Greater security risks because of easy accessibility.

Local sites may deviate from central standards, marking an
integrated system impossible.
Greater required coordination across organizational boundaries
and geographic locations.

Increased communication costs.

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8.2 INTERNET
The internet is often referred to as the network of networks- a
communication medium made possible by computers and networks.
People often exchange all kinds of information, in innumerable social
contexts, on the internet. Research and information pass back and forth
ceaselessly. It is a fluid and dynamic environment: it has no definite
boundaries, its limitations imposed only by available software and
hardware technology. It has been used exhaustively by scientific and
academic communities for many years. With recent surge in interest by
business and government, the internet or its successor network will be of
major importance in tomorrow’s world.

8.2.1 The Domain Name System

When an internet site is established on the network, it is given a unique
address. Whenever someone wants to access the site, the person has
to specify the address of the computer. Initially, these addresses were
numbers, called internet protocol (IP) addresses, but soon people
started realizing that humans preferred names, computers on the
internet were then also given names, called domain names.
When you use the domain name in accessing a computer on the
internet, the domain name is translated by the domain name system
program into the host’s corresponding address. In the domain name
“incometax.gov.in” for example, the internet host is “income tax”. This is
a government agency (indicated by “gov”). In other words, a domain
name contains information about the computer system.
Just as regular mail addresses are subdivided into countries containing
smaller units, such as state and city, domain names are divided into
various level domains. The last word in the domain name is the top-level
domain. The top-level domain can be either geographical location or
countries and territories the host computer is located in. They include the
following:

Aq Antarctica Fr France Nz New

Zealand

Ar Argentina Gr Greece Pr Puerto rico

At Austria Hk Hong kong Pt Portugal

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 Au Australia Hu Hungary Se Sweden

Be Belgium Ie Ireland Sg Singapore

Br Brazil Il Israel Tn Tunisia

Ca Canada In India Tw Taiwan

Ch Switzerland It Italy Uk United

kingdom

Cl Chile Jp Japan Us United

states

De Germany Ke Korea Ve Venezuela

Dk Denmark Mx Mexico Za South Africa

Es Spain Nl The
netherland

Fi Finland No Norway

If a geographical location is not specified, it is assumed to be the United

States. In fact. Within the United States, most of the networks use
“organizational” identification for the top-level domain instead.

8.2.2 Internet News group Organization

Anyone on the internet can start a newsgroup on any topic of interest.
Although there are some newsgroups that are moderated, in general
newsgroups are a forum where almost anything goes. In fact, there is no
guarantee that articles in a newsgroup will stay on the supposed subject
of the group. It is up to the users to use the forum wisely. There is no
one person or organization that controls or regulates newsgroups. For
the most part, it is an open and uncensored environment. News is
received through newsfeeds. At each site, a person known as the news
administrator or as a group is responsible for what newsgroups a site
receives and how the newsfeed is operated. A site may choose to
restrict the flow of news or to receive every conceivable group. A typical
site subscribes to over 1500 newsgroups.
The news administrator also decides how long to keep the news articles.
This depends on things such as the amount of local space available to

95
store the newsgroup articles and the amount of traffic on the particular
newsgroup. A news article may be stored for just a few days or up to
months. If you don’t look at a newsgroup for a while, you will miss topics
of discussion as they come and go.

8.2.3 Features of Internet

Simplicity of Use
In general the software that accesses the internet is comparatively
simple to use. The reasons for this and their implications can best be
illustrated by looking at the example of the www.
Netscape and Microsoft provide the products (www browsers) that are
used by the vast majority of people who access the www.These
products are increasingly designed for the mass consumer and not the
specialist. A core objective of the products is that they are intuitive to use
with a short learning curve. In addition to this objective is the
requirement for browsers to operate on a wide range of different
suppliers computing products and operating systems. Once the basic
principles of using a browser have been learnt, this knowledge is
transferable across most of the computing platforms that a user is likely
to encounter. A further implication of the simplicity of the browser
software is the ability of the same product to be used both horizontally
and vertically within an organization. It is increasingly likely that the CEO
and a lowly grade clerical employee will use the same interface on their
desktops.
Breadth of Access
Like the telephone network, the internet operates globally. Once
connected, the scope of access is not conditioned by geographic
boundaries. Unlike the telephone network, the costs involved in global
connection are not related to the distances involved. Conducting
transactions with the adjacent office costs the same as contacting the
farthest continent.
No other communications medium has had access to such a large
audience and range of people which increases the ability to leverage the
value of information to a scale that has never been possible.

Synergy with Other Media

Internet services have demonstrated a high degree of synergy with other
media, as can be seen from the following examples.
Book, magazine and newspaper publishers have used the www to
supplement and extend their written products. The financial times, Wall

96
street journal and numerous other publications produce both an
electronic and paper version of their products.
Publishers of software and games now deliver their products
directly over internet.
Entertainment companies regularly provide extracts of their films
and music recordings to promote the real products.

Low Relative Cost

There are many factors that support the conclusion that the costs
involved in conducting a process using internet technology will be less
that those involved in using other methods.
It is often the case that in addition to being simplified, the process
can be transferred outside the organization to be completed by the
customer. It is thought that the cost of processing a banking transaction
is over 100 times less expensive if it is conducted via the www rather
than using a traditional bank branch and teller.
This argument of cost reduction is strongest where it is possible to
undertake a process solely using the internet. The situation becomes
complex when facilities have to be retained to conduct the process using
both traditional and internet techniques.

Flexibility of Communication
The continuing releases of both Microsoft and netscape www browsers
will greatly extend the ways in which individuals can communicate. They
are:
Exchange text with each other.

Conduct voice communications.

Use a shared ‘whiteboard’ upon which they could all contribute

Have immediate access to a common base of shared information.

Activity
Which is the better internet software tool, Internet Explorer or Netscape
Communicator? To prepare your analysis, use articles from computer
magazines and the web and examine the software’s features and
capabilities. If possible, use presentation software to present your
findings to the class.

97
LET US SUM UP
Database Management system is a software system that manages the
creation and use of databases. It may be hierarchical, network or
relational. Distributed systems have computers located at various
physical sites at which organization does business and these computers
are linked by telecommunication lines in order to support some business
processes. Internet is often referred to as the network of networks which
has a wide range of applications.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1. _________ is an application of the internet

a) Breadth of Access b) Simplicity of Use

c) Both a and b c) None of the above

2. A __________ connects independent microcomputers by using
cables and processor cards that are inserted in the expansion slots of
the micros.
a) WAN b) LAN

c) MAN d) interlinked network

3.___________ system in which the processing power is distributed to
multiple sites, which are then tied together via telecommunications lines.

a) Distributed System b) Database Management System

c) RDBMS d) Integrated System

4. LAN Stands for __________

a) Local area network b) Low area network

c) Logical area network d) Legal area network

5. WAN stands for___________

a) Wide angle network b) Wide area network

c) World angle network d) Web area network

GLOSSARY

Newsgroups : Newsgroup, Internet-based

discussion group, similar to a
bulletin board system (BBS), where
people post messages concerning
whatever topic around which

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 the group is organized.

Domain name : A domain name is a unique name

that identifies a website. For
example, the domain name of the
Tech Terms Computer Dictionary is
"techterms.com".

Local area networks (LAN) : "Local Area Network" A LAN is

a network of connected devices that
exist within a specific location. LANs
may be found in homes, offices,
educational institution, or other
areas.

Internet protocol : "Internet Protocol." IP provides a

standard set of rules for sending
and receiving data over the Internet.
It allows devices running on
different platforms to communicate
with each other as long as they are
connected to the Internet.

Centralized systems : In a centralized system, all users

are connected to a central network
owner or “server”. The central owner
stores data, which other users can
access, and also user information.
A centralized system is easy to set
up and can be developed quickly

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.

99
 4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) c 2) b 3) a 4) a 5) b

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 BLOCK 3

APPLICATIONS OF INFORMATION
SYSTEM

Unit 9 : Application of IS In Business Areas- Part I

Unit 10 : Application of IS In Business Areas- Part II

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Unit 9

APPLICATION OF INFORMATION
SYSTEM IN BUSINESS AREAS - PART I
STRUCTURE

Overview

Learning Objectives

9.1 Marketing and Sales

9.1.1 Customer Inquiry and Sales Offer Processing

9.1.2 Quotation Follow-up

9.1.3 Order Entry and Order Verification

9.1.4 Customer Relationship Management (CRM)

9.2 Procurement

9.2.1 Order Scheduling

9.2.2 Purchasing

9.2.3 Delivery Monitoring

9.2.4 Goods Receiving Control

9.3 Warehousing

9.3.1 Material Valuation

9.3.2 Inventory Control

9.3.3 Support of Processes in the Warehouse

Let Us Sum Up

Check Your Progress

Glossary

Suggested Readings

Answers to check your progress

OVERVIEW
Information system finds its applications in our every walk of life. It plays
a vital role in today’s business. In this unit, we will discuss the
application of information system in business. Especially in the functional
areas of business, viz. marketing, procurement, warehousing,

102
production, finance and human resources. In this chapter, we will look in
detail how IS is applied to Marketing, Procurement and Warehousing.

LEARNING OBJECTIVES

After reading this unit, you should be able to,

• Discuss the marketing and sales functions
• explain the stages in procurement
• list out the functions in warehousing.

9.1 MARKETING AND SALES

The marketing and sales function include

i) Customer inquiry and sales offer processing

ii) Quotation follow-up

iii) Order entry and order verification

iv) Customer relationship management (CRM)

9.1.1 Customer Inquiry and Sales Offer Processing

Very powerful tools are available to handle sales offers. If they are
combined one may speak of closed sales offer systems that support the
sales force when visiting the customer. One also refers to this as
Computer Aided Selling (CAS).
Imagine that the salesperson of a printing machine manufacturer wants
to sell the owner of a private copy shop near a university various devices
(copiers, sorting equipment). She carries a notebook with her. During the
first phase she interviews the owner of the copy service shop by using a
stored checklist. She records, e.g., the number of copies made each
day, information about the quality requirements of customers, the
average size of the lecture notes and term papers to be copied, etc.
With the use of an electronic product catalogue products meeting the
needs of the copy shop are projected onto the screen. They appear as
photographic pictures and also as diagram sketches. After a pre-
selection by the customer the system puts together an arrangement of
equipment during the configuration process. In doing so it examines
many conditions and thus ensures that on the one hand the required
technical performance (operational capacity, quality, maximum footprint)
is delivered and on the other hand that the chosen components can be
integrated.
While using a stored price list for the individual components the
application system calculates in the next phase the offer price. Since this

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price is way too high for the customer, the system generates a leasing
contract with low monthly payments. As a special service, the application
system calculates the cost effectiveness of alternative machine
configuration in the copy shop under differing assumptions. Example it
may analyze that after the investment in the extra high capacity device
twice as many new students may be acquired as customers or that sales
may go down by 20% since the costs for using newly installed machines
in the university library have been lowered. In the next step the offer is
printed out and is stored on the notebook. Finally, the salesperson
transmits the offer the potentially the order (e.g., using a wireless
modem) to the central of her printing machine manufacturing company.

9.1.2 Quotation Follow-Up

This program evaluates periodically the provided offer and quotations
and makes available offer and quotation reminders to the sales
department when needed. The appropriate salesperson will then contact
the customer accordingly.

9.1.3 Order Entry and Order Verification

The order entry system is one of those points where many and important
external data are entered into the information systems of an enterprise.
Here we are concerned with efficient entry of information, but we also
want to assure the accuracy of the information.

A Practical Example
Ford-Werke AG in Germany has its central parts administration
integrated with the ordering systems of the Ford dealers. The integrated
system is called DARTS (Dealer Application Remote Terminal System).
An order scheduling program running on a computer in a dealership
makes suggestions when and in which amounts accessories and spare
parts should be ordered. The dealer authorizes or modifies these
suggestions and stores the final orders in the dealership’s computer.
Periodically the central DARTS computer fetches the orders
automatically from the dealers’ computers and transmits these
collectively to the order processing programs in the central spare parts
administration of Ford Motor Works in Cologne.
Important components are the various verification features. They must
assure that as few incorrect data as possible enter the integrated
system. The technical verification examines whether the desired variant
may be delivered or whether maybe an error occurred during the
configuration by the salesperson or whether a mistake was made by the
customer. For example, a medical device intended for export to

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Germany may be specified with an adaptor that works fine in the United
States, but does not meet the specifications of the German electricity
grid. During the credit assessment one checks whether after acceptance
and delivery of the order the customer would exceed a credit limit such
that payment may be jeopardized. The due date verification module
checks whether the customer’s desired delivery date may be kept. In
order to do this we first will have to query the inventory status starting
with the finished products, on to intermediate products and up to
externally procured parts. If one does not have enough supplies then the
system has to estimate whether the required production processes may
finish on time.

9.1.4 Customer Relationship Management (CRM)

Customer Relationship Management is a customer-oriented approach
that attempts to develop and tighten long-term, profitable customer
relations via individual marketing, sales and service concepts through
the use of modern information and communication technologies. The
challenge for information systems in this area can be seen in the need to
horizontally integrate partial systems for the pre-sale, sale and post-sale
phases (e.g., warranty and returns processing). But also vertical
integration helps, since the captured information serves to provide those
responsible for marketing and sales with important information about
preferences and behaviour of customers.

Figure 9.1Functions of CRM

A few examples of concrete functions of CRM systems are:

1. Storage of characteristics of the customer’s business and its contact
persons such that knowledge is preserved even when salespeople quit
2. Updating of the customer relationship (what and when did the
customer buy from us?)

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3. Analysis of the customer data, e.g., through the use of database
marketing
4. Suggestions for the sales department that certain campaigns or
special offers are necessary, e.g., support when a trade exhibit is
forthcoming or when for equipment one year after installation a general
overhaul is recommended

5. Selection of holiday gifts that fit the customer’s profile

9.2 PROCUREMENT

The Procurement Functions include

i) Order scheduling

ii) Purchasing

iii) Delivery monitoring

iv) Goods receiving control

9.2.1 Order Scheduling

Order scheduling, in principle, is concerned with the “programming” of
the geometric presentation.
First the system determines for each part the safety stock. The
entrepreneur determines the number of days te during which he/she
would like to remain ready for delivery, even when his own supplies are
delayed due to disruptions (e.g., a strike at the supplier’s). The
application system multiplies te with the observed average daily outward
stock movement from the warehouse and thus calculates e. In more
sophisticated versions e may be amplified through the use of statistical
methods when the forecasting for outward stock movement is
associated with large uncertainties (large differences between forecast
and actual calculations, registered by the system itself).
For the prediction of outward stock movement one differentiates
between program control and demand control. In the program-controlled
calculation the demand for component assembly groups and parts is
computed based on the planned sales and the production program.
With the demand-controlled forecast the information system observes
the outward stock movement and thus determines future demand. Table
shows as an example how input data concerning material movements
may be created.

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Delivery to customer - Finished product Shipping logistics

inventory or invoice processing

Customer returns + Finished product People-generated

inventory warehouse inflow notices

Delivery by + Raw material, Incoming goods inspection

supplier sourced parts test

+/- Shop inventory People-generated

warehouse outflow

notices

Inflow to and outflow +/- Shop inventory Shop floor scheduling

Inventory differences +/- Miscellaneous Inventory

warehouses

Warehouse transfer +/- Miscellaneous People-generated notices

houses

Legend: + : Inflow to, -: Outflow from

In many firms the core of the procedure is the first order exponential
smoothing in accordance with the formula:

The symbols denote:

= Predicted demand for period i

= Predicted demand for period i-1

= Actual demand in period i-1

= Smoothing parameter
The demand for period i is estimated by correcting the predicted value
for the period i-1 by the fraction of the thereby occurring prediction error.
The size of determines how sensitive the forecasting process will react
on the newest observations. The smaller is, the stronger the forecast
values of the past are taken into account. Looking at the formula gives
us an indication of this effect, e.g., if one assigns to be as small as
possible, i.e. zero: Now the system picks the old forecast value also as

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the new predicted value, i.e. the last observation M i-1 does no longer
play any role. For more complicated demand processes (cyclical trend,
seasonal dependencies, overlap of trend and season or demand thrusts
through sales campaigns) the exponential smoothing has to be
enhanced.
The order scheduling program finds the intersection L (desired delivery
date) of the outward stock movement line with the parallel to the x axis
that marks the safety stock, and moves to the left from this point by the
amount of the reorder time tw . In doing so the order date TBis specified.
This is the point in time when an order will have to be placed such that
after the reorder time period has passed the ordered parts will arrive on
time. The x-coordinate value TBcorrespondents to the y-coordinates s.
This is the reorder level.
In the next step a low-cost order quantity Q is calculated. If the part is
obtained through in-house production, then the order for a finished
product will have to be transferred to the application system Primary
Requirements Planning. For an intermediate good or single part the
transfer data will need to be sent to the application system Material
Requirements Planning. If we are dealing with an external procurement,
however, then material scheduling will pass along the data to the
purchasing system.

Oracle Advanced Supply Chain Planning

Figure 9.2 Oracle Advanced Supply Chain Planning

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9.2.2 Purchasing
One need to distinguish whether a) only one supplier is under
consideration, b) the systems may determine a supplier on its own (in a
module supplier selection) or c) the choice becomes the duty of the
purchasing officer. In the cases) a) and b) the computer can print the
order and store it in a temporary reservation file. In case c) the
purchasing officer is presented with the choice of suppliers on the
monitor. The orders may only be triggered when a human being has
entered his/her decision into the computer. In some firms the application
system transmits its orders, e.g., via the Extranet to the computer of the
supplier (interorganizational integration or supply chain management,
respectively).
During the classical procurement process the ordering entity, e.g., a raw
material warehouse, enters an order request into the system. This
request is processed at the PC of an employee within the purchasing
department (checking against the purchasing budget, choice of supplier,
where appropriate a modification may be made in the computer-
suggested lot size) and is then passed along to the supplier. In case of
the so-called desktop purchasing in our example the warehouse
scheduler places the order without the participation of the purchasing
department. The rules via which the purchasing department employee
checked the order request are now depicted in an electronic program.
As long as there is no interference the computer of the warehouse
scheduler transmits the order in electronic form to the supplier.
The purchasing or procurement function is according to many observers
once of the partial systems of a manufacturing firm that are drastically
changed by the Internet (“electronic procurement”). We may distinguish
among various levels
1. Information collection from WWW presentations: The
purchaser acquires on the Internet the newest product descriptions and
prices, investigates potential suppliers, etc.
2. Internet-Shops: Buyers visit virtual show rooms on the Internet
and order directly.
3. Internet-Shopping Malls: Here several Internet shops are brought
together in a portal. The buyer may thus inquire about the availability
and conditions of a multitude of potential suppliers.
4. Internet Request for Proposals: The buyer may post his needs
on an Internet portal. An intermediary compares the specification with

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the tender of potential suppliers and transfers the inquiry with the
request to make an offer.
5. Internet Market Places: One may see them as a further
development of Internet requests for proposals. The main difference is
that the potential suppliers after the request for proposals have the
possibility to examine the offers of the other competitors and to improve
their own in favour of the buyer without interference by the market place
operator (online purchase auction).

9.2.3 Delivery Monitoring

The program “order monitoring” controls in regular intervals the “external
procurement orders”, created by the program “order disposition”. If
delivery due dates are surpassed, then reminders are sent to the
suppliers. Each occurring reminder is registered in the supplier master
data. For example, the increase in the total number of reminders may
influence the supplier choice during the next purchasing cycle.

9.2.4 Goods Receiving Control

Subjects of the goods receiving control are the quantity and quality
control. The application system is supplied with the goods receiving
information that, the order schedule program produces. The goods
receiving control may thus recognize whether or not a delivery was
ordered at all and whether the delivered quantities are in agreement with
ordered quantities.
9.3 WAREHOUSING
The functions of warehousing include material valuation, inventory
control and support of processes in the warehouse.

9.3.1 Material Valuation

The application system extracts valuation approaches from the material
master data such as (with externally procured material) the prices from
the order or delivery, permanently stored stock prices or the newest
costs based on a product costing analysis. One may also consider a
simple evaluation calculation such as with smoothened averages (with
each inward flow an average price is calculated).

9.3.2 Inventory Control

Mechanized inventory control is in principle very easy. One follows the
following formula:

New inventory = old inventory + inflows - outflows

Complications, however, may arise, e.g.:

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 Aside from the ‘bureaucratically’ managed, i.e. using stock
requisitions and delivery notes, warehouses there is shop floor stock for
which not every single movement is accompanied by a book entry.
One has to consider reservations, i.e. parts, that are physically still
in the warehouse even though they are already encumbered and may
only be delivered for a specific purpose.
Stock-taking as an example demonstrates how information systems
trigger processes carried out by men and thus makes essential
contributions to the orderliness of companies (concurrence between
“book inventory balance” and actual “inventory”). Occasions requiring
inventories that applications systems are capable of determining
themselves are:

1. Exceeding of set maximum stock levels

2. Falling below a minimum level (it is recommendable to conduct an
inventory when few items are in stock because then the effort to count is
small)

3. The information of book inventories below zero

4. Within a parts or item category a certain number of fluctuations has
occurred (with this a certain probability exists that an error occurred
during the postings)
5. With a parts or item category no fluctuations were observable over
a longer period of time (possibly this parts or item category does no
longer exist)
6. Control via computer-generated random numbers to ensure the so-
called surprise effect when there is risk of theft

7. Activation on an appointed data

The inventory is conducted either by counting everything or through
sampling. During the sampling inventory the information system
determines a suitable sample size using methods of mathematical
statistics and extrapolates the counted results.

9.3.3 Support of Processes in the Warehouse

When combining business administration processes with technical
information systems many opportunities for efficient warehouse
management arise. Among them are:
1. Information systems administer high rack storage areas. Palettes
are being transported automatically to available storage locations using
horizontal and vertical movement. The individual palettes are not sorted

111
based on any particular order (so-called random or chaotic storage).
Since the computer stores an image of the warehouse, the system is
capable of finding available positions any time.
2. During stock withdrawal “position” as part of a consignment (order
or shipping process) are fetched (partially) automatically from their
storage location, sorted and are being transported to the location for
packing and shipping.

A Practical Example
Avon CosmeticsTM opens the shipping cartons that had arrived folded
with an automated machine. Also automatically each carton is marked
with a bar code that identified it as part of a customer order. A control
system reads this bar code and delivers the carton over belts, gates and
switches only to those unloading/loading locations whether there are
ordered parts/items. The employees handling the consignment receive a
graphical presentation on a monitor that shows to which shelf location
and space they have to move. This shelf space is being illuminated at
the right moment and on a digital display the employee sees how many
units (e.g., lip sticks, tubes) will have to be picked and be placed into the
carton. After this is done the employee pushes a button to report the
process as completed. The carton is then transported automatically to
the next location. In that way a sort of “consignment progress control”
occurs. The system transmits data to a logistics manager who is then
informed of which shipping tasks are forthcoming and how he/she is to
manage these shipments.

LET US SUM UP
In this unit we have discussed the application of information system in
business. In marketing the information system finds its application in
customer inquiry and sales offer processing, quotation follow up, order
entry and order verification and customer relationship management. It is
helpful and goods receiving control in procurement function. The
warehousing functions include material valuation, inventory control and
support of processes in the warehouse.

CHECK YOUR PROGRESS

Choose the Correct Answer

1. Analysis of the customer data is a function of ____________
a) Order scheduling b)CRM

c) Procurement d) DBMS
2. Purchasing is a function of_____________

112
a) Order scheduling b)CRM

c)Procurement d) Information System

3. The order for a finished product will have to be transferred to the
application system Primary Requirements Planning.
a) Order scheduling b)Material Requirements Planning
b) Primary Requirements d) Procurement Planning

4. Customer Inquiry and Sales Offer is also called __________

a) Order scheduling b)CRM

c)Procurement d) Computer Aided Selling

5. Quotation follow-up is a function of ___________

a) Marketing b) Financing

c) Operation d) Personnel

GLOSSARY

Order scheduling : Order scheduling is an additional

process in the processing of sales
documents or purchasing
documents that helps to optimize
the delivery dates for each item

Purchasing : Purchasing is the process a

business or organization uses to
acquire goods or services to
accomplish its goals.

Delivery monitoring : Delivery monitoring or tracking

software, which reports real-time
order progress, can provide
valuable visibility to both customers
and businesses

Goods receiving control : All goods are received at the

centralized receiving department
within specified time only, under the
supervision of the receiving clerk

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston

113
 publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.
ANSWERS TO CHECK YOUR PROGRESS

1) b 2) c 3) c 4) d 5)a

114
Unit 10

APPLICATION OF INFORMATION
SYSTEM IN BUSINESS AREAS - PART II
STRUCTURE

Overview

Learning Objectives

10.1 Production

10.1.1 CIM

10.1.2Primary Requirements Planning/MRP II

10.1.3 Material Requirements Planning/MRP I

10.1.4Throughput Scheduling

10.1.5 Capacity Balancing

10.1.6Availability Check
10.1.7 Order Clearance

10.1.8 Job Shop Scheduling

10.1.9 Computer Aided Manufacturing

10.1.10 Production Progress Control

10.2 Finance

10.1.1Cost Center Accounting

10.1.2Production Cost Accounting

10.1.3Supplier Accounts Auditing

10.1.4General Accounting

10.1.5Accounts Receivable

10.1.6Accounts Payable

10.3 Human Resources

10.3.1Work Schedule Management

10.3.2Payroll Accounting

10.3.3Reporting Programs

10.3.4Special Action Programs

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10.4 Decisions-Support Systems

10.5 Executive Support Systems

Let Us Sum Up

Check Your Progress

Glossary

Suggested Readings

Answers to check your progress

OVERVIEW
Information system finds its applications in our every walk of life. It plays
a vital role in today’s business. In this unit, we will discuss the
application of information system in business. Especially in the functional
areas of business, viz. marketing, procurement, warehousing,
production, finance and human resources. In this chapter, we will look in
detail how IS is applied to Marketing, Procurement and Warehousing.
LEARNING OBJECTIVES
After reading this unit, you should be able to,
• evaluate the functions of production.
• evaluate the functions of finance and human resources.

10.1 PRODUCTION
The production function includes CIM, MRP I, MRP II, throughout
scheduling, cap acing balancing, availability check, order clearance, job
shop scheduling, CIM, Computer aided quality assurance and
production data entry.

10.1.1 Computer Integrated Manufacturing(CIM)

Information processing in the production area is earmarked in that
business management data processing, technical data processing, as
well as physical production processes have to be integrated. The
underlying concept is labeled Computer Integrated Manufacturing (CIM).

On the business management side (in the narrow sense) we have to

manage production planning and control (PPC). Plant maintenance
planning and control are omitted here. PPC constitutes the transaction
chain in the flow of orders. The transaction chain that connects the
design, the physical manufacturing and the quality control of the product
is linked by the so-called C techniques. At the cross-over point
Computer Aided Manufacturing (CAM) the two chains are so intertwined

116
that a separation into the business management and technical parts is
barely recognizable.
This illustration is of relevance mainly to firms, e.g., in the mechanical
engineering industry, that manufacture products that have been ordered
that have been ordered by customers on an individual basis or with
certain variants in job-shop manufacturing settings. For firms that turn
out mainly mass-produced items for an “anonymous” market, such as
cleaning detergent, other configurations of the building blocks will have
to be chosen.
A very difficult problem in the conceptualization of application systems in
the production area is the intensive reciprocal interaction among the
individual systems. Basically, one should depict. CIM as one huge
simultaneous model. Figure 5.3 shows just one example of the effects of
integration: If one increases the lot size, this implies that one is willing to
put up with increased inventories that tie up more capital. However due
to shorter set-up times, bottlenecks are better utilized. Thereby the
throughput times of orders decline initially during the manufacturing
process. After exceeding a minimal value, cycle times will tend to
increase again, because lots will increasingly have to wait directly at the
manufacturing unit where a larger and previously scheduled lot is being
processed for a longer period of time.
The production flow depends on various factors, e.g., lot size at various
manufacturing levels, production sequences, as well as the choice of
constructive variants and alternatives in conjunction with work flow,
plans and schedules. Even with the largest available computers today it
is still impossible to master a simultaneous optimization. During the
course of several decades a sequence of the modules established itself
that was considered practical in many respects, but not always optimal.
It is based on the following considerations.

10.1.2 Primary Requirements Planning/MRP II

Primary demand planning balances roughly desired sales or production
quantities, respectively, with available manufacturing capacities. This
early-on coordination of available capacity and capacity requirements is
to avoid that the floor shop is inundated with unrealistically planned
production orders. For this one may use, e.g., sales forecasts based on
statistics. These systems are referred to as Manufacturing Resources
Planning (MRP II). We need to distinguish between. MRP II and MRP I
“Material Requirements Planning”

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10.1.3 Material Requirements Planning/MRP I
The demand for final products (derived from order entry, sales planning
or primary demand planning) must be broken down (“bill of materials
explosion”) into its components (secondary demand).
It is organized as a building block parts list, i.e. one recognizes (in the
shape of the dashed rectangles) from which subordinate parts each
respective supra-ordinate part is assembled. The application system,
e.g., determines that per passenger car five wheels are needed,
including the spare. The assembly team “wheel” would subdivide this
again into one rim, one tire and four clamping bolts, etc. In that way one
would calculate first the gross requirements of the assembly teams and
the component parts. The application system examines also whether or
not cost-effective bulk order may be placed through bundling of
demands for different future time period. In several industries, e.g.,
aluminum, glass, optics, paper and textile, we may specify through
rather complicated mathematical procedures how parts (e.g., paper
webs) will have to be cut out of larger raw material units (e.g., paper
master rolls) such that waste is minimized. During such materials
demand planning the transition to the subsequent time scheduling is
implemented in that the system considers the associated lead time. This
is the time span by which the sub-ordinate component has to be
available earlier than the supra-ordinate component such that the
subsequently requisitioned parts may be assembled in a timely fashion.
The results of the procedure are roughly planned work, manufacturing or
production orders, respectively, or (with external procurement)
requirements to be transferred to order scheduling.
10.1.4 Throughput Scheduling
Whereas volume planning determined availability scheduling, i.e. those
points in time at which a part is to be delivered, through forward-shifting,
throughput scheduling has to generate the starting dates of the
individual work processes.

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 Figure 10.1 Throughput Scheduling
A method for this is backward scheduling that calculates from the
delivery deadline found in material requirements planning toward the
present. An example in figure 5.5 is the work order M is assembly
requiring the finished products of the work orders A, B and C. One
should note that in this phase waiting periods, as they tend to come
about through capacity bottlenecks, are not considered. In other words:
We work here with the simplified assumption “capacity is infinite”. With
other, more complicated and computation-intensive methods this
simplification is not applied, as they conduct simultaneous scheduling
and capacity planning.
Particularities occur when the applications system determines that a
work process should have started several days or weeks ago “prior to
the present” (sometimes students gain such knowledge as well during
the manufacture of the product “examination”!). In order to avoid revising
the hitherto production planning because of the later delivery date, the
application system will attempt to shorten the throughput time in
comparison to the planned values. For examples, it may test whether
several machines are available for a work process and then split a lot
onto two or more manufacturing resources that then “divide” the work
among themselves. The system then has to determine through the use
of parameters defined by manufacturing management the trade-off
between lead-time reduction and the additional expenses for setting up a
second, third, etc. machine.

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10.1.5 Capacity Balancing
If in the throughput scheduling no attention had been paid to capacities,
it may occur that in individual periods certain work places are heavily
overloaded whereas others are underutilized.

Figure 10.2 Capacity Balancing

Here capacity balancing is put into place. You recognize at first glance
that, e.g., one needs to tip the peak in period 10 into the valley of period
10. People recognize this due to their pattern recognition capabilities in
which they are clearly superior to a computer. This is why in many cases
one will not attempt to automate capacity balancing, but to show the
capacity “mountains” on the monitor of a control station called Leitstand
(see section 10.4.8) and to deliver appropriate information above which
individual production and customer orders contribute to the work-load
during a particular time period. Based on this information a manager can
decide on the rescheduling measures.

10.1.6 Availability Check

It would be awkward if a computer triggered the start of a work order that
could not be executed because during the same time period a needed
machine is down for maintenance or repair, externally procured material
did not arrive in a timely fashion due to tardiness of the supplier or a
control program (NC-program) has not been written yet. Maybe
employees with the right qualifications are on holiday on that particular
day. It is the goal of an availability check to set aside such production
orders for which any resources might be missing.

10.1.7 Order Clearance

The order clearance process chooses (while being controlled by
parameters) a subset of those orders which have passed the availability

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check for actual production. For example, all work orders are selected
that have to start within the time span “clearance day + ten working
days” according to throughput scheduling.

10.1.8 Job Shop Scheduling

One of the tasks of floor shop scheduling is to find a machining
sequence for the orders at a work place that fulfills certain goals as well
as possible. Such goals may be the minimal overall lead time of the lots,
maximal capacity balancing, minimal capital commitment, minimal set-up
costs, and maximal adherence to schedules or also simplicity of control
processes. Since the emphasis on goals may vary greatly in various
industries, in different strategic circumstances or varying economic
conditions very complex control tasks arise.
Control approaches may be structured according to whether the next lot
to be machined at equipment that just was freed up is to be determined
or whether it is more important to assign appropriate manufacturing
resources to upcoming production orders when there are several to
choose from. The latter plays a role in rolling mills or also in the paper
industry and here especially with regard to cutting problems.
By using priority rules it becomes possible to consider that actual
emphasis of the different goals. One may apply, e.g., a computer-based
control system such that at a bottleneck the system chooses the very lot
among a set of waiting ones that fits best for the actual set-up condition
of the manufacturing resources. In this way it is possible to keep the set-
up costs low. On the other hand, if one decides to prioritize the lot that
ties up the largest amount of capital, it is possible to guide capital -
intensive products through the shop in shorter time and as a result
reduce the typing-up of capital.
When a largely automatic control is not (yet) possible due to the outlined
complexity, often production control stations (so-called Leitstands) are
utilized that support scheduling by a person. With suitable user
interfaces, control station personnel will be able to evaluate the current
manufacturing situation (e.g., capacity balancing of bottlenecks, idle
machines, late orders, minimum inventory levels, resources not
available).
Shop floor control issues documents necessary for production (job
tickets, time tickets, material documents, quality control receipts, etc.). It
is practical to make these machine-readable (e.g., in that they feature a
magnetic strip), since when they return from the manufacturing since
they may be read into the computer system again (“return data carrier”).

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Some firms do not issue such documents; instead employees identify on
their screens what they should produce and how (“paperless factor”).

10.1.9 Computer Aided Manufacturing

The term Computer Aided Manufacturing (CAM) does not only comprise
the information systems support of physical production in the narrow
sense, but also systems serving the automation of the functions
transporting, warehousing, testing and packing. CAM administers
numerically controlled machines (CNC, DNC machines), as well as
manufacturing cells and flexible manufacturing systems, processes (e.g.,
in the chemical industry), robots and various types of transportation
systems. One might add the administration of warehouses, especially
buffer warehouses in manufacturing.
The position of CAM as a manufacturing information system in the
manufacturing execution is characterized by two attributes:
1. One attempts to accompany the material flow with CAM over several
phases. A comprehensive CAM system sets up manufacturing
resources with tools automatically captures their down times and
machining times, recognizes worn-out or defective tools and exchanges
these. Moreover, work pieces or the material are taken from the
warehouse in accordance with the production schedules. Next they are
passed on to the manufacturing resources in a suitable sequence (e.g.,
in a flexible manufacturing system such that as few set-up processes as
possible are required) and the physical manufacturing processes are
controlled (e.g., the setting of a spot weld by a robot or the drilling speed
of a drill).
Beyond that driverless transportation systems are directed, finished
products are packaged and made available for shipment. In that way
one arrives at the “sparsely populated factory” in which people carry out
merely controlling tasks. Coordination is often the duty of a host
computers or a production control system consisting of several
networked computers. A control system as a CAM component may not
be seen as comparable to a control station as part of a production
planning and control system.
with preliminary reservation data of the placed production orders. One of
the challenges in the further development of production data entry
systems is to capture as much data as possible automatically, e.g., from
production equipment, transportation equipment or automated testing
machines (machine data logging) or directly emanating from a process
(process data logging). It is possible, e.g., in a pharmaceutical company

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to register the quantity of the manufactured granulated material at a
weighing station that is coupled to a computer.
On the other hand it is important to examine, especially with machine
data and process data logging, the flood of largerly automatically
received data for their correctness and plausibility. This is necessary
since, similar to the order entry, process data logging is an important
entry point to integrated information systems. Consequently, errors
occurring during the data capture may easily trigger numerous
erroneous after-effects.

CAM FLOW CHART

Figure 10.3 Cam

10.1.10 Production Progress Control

The application system production monitoring utilizes the production,
machine and process logged data to recognize production progress. If
missed deadlines are looming, it issues reminders.

10.2 FINANCE
In comparison to other areas we find relatively few administration and
scheduling systems in the finance area (excluding accounting). An
important, although difficult task, is the finance and liquidity scheduling.
Here we are concerned with predicting the likely revenues and outlays
and, depending on the accounting balance, deciding about use of
available funds or about getting a short term loan. Especially
international firms utilize a cash management system for this purpose.

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Above all it is the duty of the computer to predict the extends and dates
of payments. In integrated information systems we may draw, e.g., upon
the following data: sales plan, goods on order, account receivable,
accounts payable, purchase commitments, costs projections, regularly
recurring payments (e.g., wage and salary payments or rents) and
investment plans.

10.2.1 Cost Center Accounting

Information systems-supported cost accounting is largely a recreation of
the procedure as it is conducted manually by the employees. For the
machine hourly rate we have the advantage that in the CIM conception
machine times may be determined easily and rationally through the
integration with programs in the production area. Similar things may be
said about target costs that, e.g., may be calculated by multiplying the
actual times (registered exactly in the production data entry) with the
target prices. Finally, integrated information systems make it possible to
determine aside from cost deviations also deviations of consumed
quantities, as well as capacities and thus being able to deliver
suggestions for an interpretation for the target vs. actual deviation.
Altogether integrated information systems enable cost center accounting
to work with very differentiated data. Those, in turn, make it possible to
apply individual direct cost and product profitability calculations.

10.2.2 Product Cost Accounting

Preliminary Costing
For preliminary costing three data groups are at out disposal within an
integrated concept:

1. Material master data

2. Parts lists or bills of materials

3. Task schedules with the work processes, manufacturing resources
to be utilized and the corresponding times (component routing)
The preliminary costing program passes “bottom-up” through the parts
list, from the component part to the finished product, and merges
component by component. This is done while utilizing the latest actual
costs per activity output unit (e.g., per manufacturing minute) which have
been determined by the cost center accounting program. Figure 5.9
depicts this procedure schematically.

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Post Costing Analysis
The post costing analysis program also uses many data from the
production area. Data pertaining to material movement and time tickets
or wage slips (delivered from the production data entry and pay
accounting in machine-readable form) generate the direct costs that are
posted to the cost object accounts. As far as one wants to consider
indirect costs, if at all, this occurs through adding overhead charges to
the direct costs and by costing the usage times registered by the
production data entry system (e.g., via machine hourly rates).

10.2.3 Supplier Accounts Auditing

Supplier accounts auditing is another good example for how most of the
data are made available in machine-readable format in an integrated
information system: The prices in the material master records, supplier-
dependent conditions in the supplier master records, the order and
goods receiving data in the preliminary data registers and the entered
supplier invoices or the electronically transmitted ANSI X12 or EDIFACT
invoices.
The application system is capable of conducting a number of checks
with the preliminary registered data, especially on:

1. Concurrence between delivered and invoiced quantities

2. Concurrence between prices and conditions of the offers and their
delivery

3. Correctness of the supplier invoice

In case of differences the system dispatches a message to the
responsible employee who then will address the discrepancy. If
problems cannot be solved, he/she would block the invoice and trigger
further clearing.

10.2.4 General Accounting

The structure of general accounting programs is determined by the
method of double book keeping. A large amount of the input data is
being delivered by other programs, including, e.g., condensed
accounting records from accounts receivable and accounts payable
programs or material postings from the material valuation program.
Characteristic for an integrated information system are the excellent
reconciliation capabilities that enhance the security in accounting (e.g.,
between general accounting and sub-ledger accounting or between
receivable accounts of billing and the sum of the debitors’ postings). But

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even the input of booking procedures that still need to be handled
manually has been streamlined, for example in that the accountant is
being guided from posting to posting and thus is being made aware of
any erroneous entries right away.

10.2.5 Accounts Receivable

Accounts receivable manages the preliminary data registry debitors.
Business transactions are transmitted as transfer data by the billing
program and are then posted by the application system into the
receivable accounts. When due dates are exceeded ready-for-shipment
reminders are issued through the use of stored text modules. In
accordance with the respective reminder level (e.g., first and second
reminder) the program applies formulations of varying degrees of
“sternness”. Received customer payments are registered and the
corresponding preliminary data registries are erased.

10.2.6 Accounts Payable

The accounts payable program is rather similar to the accounts
receivable program. A module, however, is to be considered through
which payments may be processed at an optimal point in time. Here it is
appropriate to build in a parameter through which management may
provide general guidelines pertaining to the conduct of payments. Then
it is possible to pay with or without cash discounts depending on a firm’s
liquidity.

10.3 HUMAN RESOURCES

10.3.1 Work Schedule Management

By using information systems it becomes possible to capture times sheet
data efficiently and very accurately. The two main demands for flextime
systems “sufficient information of the employee about the status of
his/her time sheet account” and “transfer of the time sheet data into
payroll accounting” are thus fulfilled much easier. Such modules gain
increasing importance as firms introduced more and more multifaceted
work schedule models.

A Practical Example
The employee carries a machine-readable company identification card
that features a magnetic strip or even a chip. This will be entered into a
card reader when he/she arrives for work and when he/she leaves. The
electronic system reads the individual’s identification number and stores
it with the correct time. At the same time the system checks the arrives-
leaves cycle and makes the employee aware of any discrepancies. The

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latter may be the case, e.g., when the employee forgot to enter his
“leaves’” data to the information system the prior evening. At the same
time it is possible to display to the employee the accumulated total work
time during a given month, as well as the target/actual comparison.

10.3.2 Payroll Accounting

Under the label payroll accounting we may group the programs for
payroll (for wages and salaries), training and development allowance,
and commission accounting. Their structure may be determined by wage
agreements and legal stipulations.
Among the tasks of payroll accounting programs is the determination of
the gross pay based on activity and time sheet data or quantitative
performance, marginal return or sales performance (as with commission
accounting), the determination of extra pay, such as on holidays, the
computing of net pay and net salaries while considering taxes, social
insurance contributions and other deductions. Moreover, such programs
also take into account the determination of payroll deductions such as
the gradual paying back of pay advances or personal loans from the
employer. Difficulties with payroll accounting programs are not so much
with their development but rather with the ongoing changes that are
often determined late by the legislator, especially concerning the tax
laws. Consequently, the support and care for such systems is rather
expensive.

10.3.3 Reporting Programs

Within the human resources area a multitude of notifications, in part due
to legal reporting requirements, have to be made by the employer. Often
such reports are just printouts of certain fields within personnel data
bases. Examples are various reports pertaining to employments
statistics and notifications about wage and salary changes to all
employees.

10.4 TACTICAL AND STRATEGIC INFORMATION SYSTEM

Strategic information
All organizations plan their strategy according to their needs and
requirements. The strategic information refers to what an organization
wants to achieve in the short or long term. The following is the input to
formulate the strategic information of an organization:
External input: Macroeconomic environment, what competitors are
doing, change in government policies, etc.

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Internal input: Company vision and mission, top management input,
audits and feedback, learning from the past, future challenges, etc.
Collating all this input helps an organization plans its strategy. These
strategies have no meaning at all if they are not properly supported by
means to achieve them. This is actually tactical information which is
nothing more than the enablers to actually implement the strategies.

Figure 10.4 Strategic Planning Model

Tactical information
An organization needs to do a necessary and sufficiency check for this
tactical information. The necessary and sufficiency check actually helps
an organization to establish that the tactical information is actually
necessary and sufficient for implementation of a strategy.
The basic difference between strategic and tactical information can be
explained with a simple example of a steel making company.
The steel making company produces different grades of steel at the
lowest cost and is a benchmark in the industry. The company wants to
sustain the identity of being the lowest cost producer of steel for the long
term. So this particular objective of the company should be termed as
strategic information as it qualifies as a long-term goal of the company.
Now the company analyzes that it can achieve its target of being the
lowest cost producer only if it is able to secure a long-term supply of
cheaper raw materials. The long-term supply of cheaper raw materials
can, in turn, only be ensured if the company has its’ own source of raw

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materials and it is not dependent on other suppliers. The raw material for
the steel company is iron ore, coal, and limestone. All these are natural
resources available in the Earth’s crust. Therefore, the company decides
to acquire new mines so that raw material security can be ensured in the
future. This, in turn, supports its strategy of lowest cost producer of steel.
Therefore it can be termed as tactical information.

10.5 DECISIONS-SUPPORT SYSTEMS

Any system that supports a decision is a decision support system (DSS).
Like MIS, DSS serve the management level of the organization.
Information systems support decisions in vastly different ways, and DSS
are a class of systems that supports decisions in a unique way (at least
when compared to the past). DSS help managers make decisions that
are semi structured, unique, or rapidly changing, and easily specified in
advance. DSS have to be responsive enough to run several times in a
day in order to correspond to changing conditions. While DSS use
internal information from TPS and MIS, they often bring in information
from external sources, such as current stock prices or product prices of
competitors
Clearly, by design, DSS have more analytical power than other systems;
they are built explicitly with a variety of models to analyze data. Second,
DSS are designed so that users can work with them directly; these
systems explicitly include user-friendly software. This requirement
follows both from their purpose (to inform personal decision making by
key actors) and from the method of design. Third, these systems are
interactive; the user can change assumptions and include new data.

Figure 10.5 Decision-Support Systems

Characteristics of DSS
• DSS offer users flexibility, adaptability, and a quick response.
• DSS allow users to initiate and control the input and output.

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 • DSS operate with little or no assistance from professional
• programmers.
• DSS provide support for decisions and problems whose solutions
• cannot be specified in advance.
• DSS use sophisticated analysis and modeling tools.

10.6 EXECUTIVE SUPPORT SYSTEMS

Senior managers use a category of information systems called
executive support systems (ESS) to make decisions. ESS serves the
strategic level of the organization. They address unstructured decisions
and create a generalized computing and communications environment
rather than providing any fixed application or specific capability. ESS are
designed to incorporate data about external events such as new tax
laws or competitors, but they also draw summarized information from
internal MIS and DSS. They filter, compress, and track critical data,
emphasizing the reduction of time and effort required to obtain
information useful to executives. Although they have limited analytical
capabilities, ESS employs the most advanced graphics software and can
deliver graphs and data from many sources immediately to a senior
executive’s office.
Unlike the other types of information systems, ESS is not designed
primarily to solve specific problems. Instead ESS provides a generalized
computing and telecommunications capacity that can be applied to a
changing array of problems. While DSS are designed to be highly
analytical, ESS tends to make less use of analytical models. Instead,
they deliver information to mangers on demand and on highly interactive
basis.
ESS should answer the following questions: what should we be in? What
are the competitors doing? What is the impact on earnings of proposed
changes in the investment tax credit? Etc.

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 Figure 10.6 Executive Support Systems

LET US SUM UP
In this unit we have discussed the application of information system in
business. The production function includes CIM, MRPI, MRPII,
throughout scheduling, capacity balancing, availability check, order
clearance, job shop scheduling, CAM. Computer Aided quality
Assurance and production data entry. The finance function includes cost
center accounting, product cost accounting, supplier accounts auditing,
accounts receivable and accounts payable. Work schedule
management, payroll accounting, reporting program and employee’s
tasks assignments are some of the Human resource functions.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1. Primary resource planning is also called as ____________

a) Manufacturing Resources Planning b) Material Resources Planning

c) Capacity Balancing d) Special Action Programs

2.Transfer of the time sheet data into payroll accounting are thus fulfilled
much easier by _________

a) Work Schedule Management b) Order Scheduling

c) Capacity Balancing d) Material Resources Planning

3. The production flow depends on factors like__________

a) Lot size b) Production Sequences

c) Both a and b d) None of the above

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4.To find a machining sequence for the orders is called____________

a) Work Schedule Management b) Order Scheduling

c)Job scheduling d) Material Resources Planning

5. __________ may group the programs for payroll training and
development allowance, and commission accounting.

a) Work Schedule Management b) Payroll accounting

c) Job scheduling d) Management accounting

GLOSSARY

Computer Aided Selling : The term sales support involves

using computer-based tools and
methods to optimize sales
processes and in doing so increase
sales. Sales support is a central
component of Customer
Relationship Management (CRM)
and should be used in all areas of
sales. From acquiring new
customers to the processing of
existing customer enquiries. The
basic motivation behind sales
support is improve the efficiency of
sales processes, to increase service
quality and sell more of your own
products and services

Computer Integrated The manufacturing approach of

Manufacturing : using computers to control entire
production process. This integration
allows individual processes to
exchange information with each
part. Manufacturing can be faster
and less error-prone by the
integration of computers.

Customer Relationship CRM stands for “Customer

Management : Relationship Management” and
refers to all strategies, techniques,
tools, and technologies used by
enterprises for developing, retaining

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 and acquiring customers.

Production Planning : Production planning is the is

the planning and allocation of raw
materials, workers, and workstations
to fulfill manufacturing orders on
time. Production plans are usually
set by the production managers who
supervise the shop floor. A
good production plan makes the
best use of available resources to
deliver orders on time

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) a 2) a 3) c 4)a 5) b

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 BLOCK 4

PLANNING & DEVELOPMENT OF IS

Unit 11: Planning of Information System

Unit 12: Development of Information System

Unit 13: Overview of Alternative Application

Unit 14: Alternative Application Development Approach

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Unit 11

PLANNING OF INFORMATION SYSTEM

STRUCTURE

Overview

Learning Objectives

11.1 Information System Planning

11.2 Challenges in Information Systems Planning

Let Us Sum Up

Check Your Progress

Glossary

Suggested Readings

Answers to check your progress

OVERVIEW
Information system planning is part of business planning concerned with
deploying firm’s information systems resources, including people,
hardware and software. In the eighties the system was developed with
the assumption that information needs do not change often. But the late
nineties have seen the revolutions in information technology.
LEARNING OBJECTIVES
After reading this unit, you should be able to,
• discuss the challenges in information system planning
• explain Planning of Information system.

11.1 INFORMATION SYSTEMS PLANNING

Planning is the process of deciding what will be done, who will do it,
when they will do it, how will it be done, and what are the desired results.
At strategic levels, the questions are about the firm’s overall priorities
and goals for the information systems and technical and organizational
approaches that will be used. At project levels, the questions boil dow n
to two types of concerns: first, what specific capabilities are required in
each system, and second, who will do what and when will they do it to
produce the specific results needed in a specific project, such as
building a new sales tracking system or retraining users of a system that
has been changed.

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Information Systems Planning should be an integral part of business
planning. Business Planning is the process of identifying the firm’s goals,
objectives and priorities, and developing action plans for the
accomplishing those goals and objectives. Information systems planning
is the part of business planning concerned with the deploying the firm’s
information systems resources, including people, hardware, and
software. The goals, objectives, and priorities of the business should
drive all the plans. Furthermore, although each plan is produced by
specialists in a particular department, all the plans should support the
same strategy and goals. From this viewpoint, the unique aspect is that
it concentrates on Information System projects.
Needs and Objectives
• To ensure that Information System both complements and assists in
the achievement of our business goals.
• To ensure that the use of scarce resources are maximized within a
business.
• To maximize the benefits of changing technology.
• To take account of the different viewpoints of business
professionals and IT professionals
Many prescriptions for project planning call for starting with a search for
problems needing solutions. By the time a company is ready to do
project planning, it is far too late to search for problems needing
solutions. In fact, we already have that at hand- it evolved from business
objectives to MIS objectives, from business strategic plans to MIS
strategic plans, from business operating plans to MIS operating plans.
We know that project we are working on and what the general needs
and objectives are. We now need to refine these statements of need.
The statement of general needs and objectives is almost always too high
level and vague to be implemented. The process of refining these vague
requirements is crucial factor in project success. These key steps should
be taken:
1. The problem statement must be made comprehensible to those who
will design and implement the MIS. For example, the management need
may be for an in-depth market analysis. The computer specialists may
have no idea what all that includes; hence the importance of breaking
down the idea “market analysis” to include and define “competition”,
“market share”, “distribution channels”, “sales force size”, and so on. In
other words, first determine the user’s needs in specific terms.
2. Input. From the user’s perspective, what items can the user
reasonably are expected to provide? Human-to-machine interface may

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be important, and if it is, these requirements need to be detailed during
this phase. For example, if a clerk will be the user, very clear messages
prompting for input are required.
3. How the system will work should be specified only in very general
terms at this time. In fact, the designers should concentrate on “what”
the system should do and leave as implementation details as reasonable
to the specialists who will actually produce the MIS. For example, a
permanent payroll record may be a valid need or objective. But the
internal format in which the file is maintained is probably a too much
detail for this phase of design.
4. Output. If the user has expectations about, or requirement for, the
results of the system, those need to be detailed. For example, sample
user reports should be drawn up to this stage and taken for the future
users for approval.

5. Budgets are a key part of detailing the needs of a project.

In summary, the management statement of the problem must be taken
and broken down into a language the computer specialists will
understand. It must also be clarified by making more specific statements
of requirements and then reviewing these with the managers who
originally posed the problem.

ISP Planning Types

Top-Down Planning A generic information systems planning
methodology that attempts to gain a broad understanding of the
information system needs of the entire organization.
Bottom-up Planning generic information systems planning
methodology that identifies and defines information system development
projects based upon solving operational business problems or taking
advantages of some business opportunities.

11.2 CHALLENGES IN INFORMATION SYSTEMS PLANNING

The specific steps and procedures for creating an Information System
plan vary from company to company, depending on factors such as the
way the company manages its various planning and control cycles and
the extent to which IT professionals are centralized or dispersed in to
business units.

Difficulty in Foreseeing and Assessing Opportunities

It is sometimes said that strategies become apparent only after they
have been accomplished. Consider the Sabre Reservation system,

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which is often considered a major factor in American Airlines competitive
success. That system was not initially designed as a major competitive
strategy. Rather, it evolved through four distinct stages over 30 years. It
began in the early 1960s as a response to American Airlines inability to
use manual methods to monitor its inventory of available seats. Although
a technical achievement for the time, it was a far cry for the powerful
system later accused of presenting biased displays to travel agents so
they would see and select American Airlines flights for their clients. The
point of the example is that it is usually difficult to forese e the way
information system innovations will develop. As with many complex
products, users typically identify new uses and possible improvements
that the inventor never imagined. Consequently, Information System
plans should be reviewed periodically and systems should be designed
to be flexible and extendable.
Difficulty in Assuring Consistency with Organizational Plans and
Objectives
A fundamental problem with Information System planning is that
individual departments within companies have their own priorities and
business practices and often have difficulty working toward a mutually
beneficial plan. This issue is especially significant if a large organization
attempts to develop an information architecture and infrastructure that
spans departmental boundaries. Even if mutual benefits seem likely, the
process of developing the plans takes a lot of time and effort, and the
rewards may be distributed unevenly.

Difficulty in Building Systems

Large information systems are complex creations that often take years
to build and involve many organizational, political, and technical
tradeoffs. In many system development efforts, only a small cadre truly
understands what the system is trying to do and how it will operate.
Bank of America, Chemical bank and the London Stock Exchange who
have suffered costly project failures but are never reported and for every
unreported failure there are many semi failures, systems that were
developed and installed but never came close to accomplishing their
goals. The difficulty of building systems is one of the reasons Information
System investments require management attention.

Difficulty in Maintaining Information System Performance

The products and services produced by the information system may not
have the cost, quality, responsiveness, reliability, and conformance
expected by its customers. The business processes within the system

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may lag in productivity, flexibility, or security. Participants can cause
problems due to anything from inattention to criminality. The information
in the system can cause problems due to anything from occasional
inaccuracy to fraud. Furthermore, the technology can impede or stop the
business process by degrading or failing. Each of these problems can be
planned, but at the cost of more effort, more attention, more expense,
and less flexibility.

Difficulty in Collaborating with System Builders

Business professionals and IT professionals sometimes talk past each
other as if they come from different worlds. No specialists talking to
lawyers, doctors, or scientists often recognize the resulting frustrations.
Specialists may have trouble translating their specialized knowledge and
worldview into terms no specialists genuinely understand. No specialists
may feel they can’t speak the lingo and can’t even explain their
concerns, no less engage in a genuine dialogue about alternatives. Even
if they trust the specialists, they are left with a queasy feeling of
operating too much on trust and too little on mutual understanding.

LET US SUM UP
Information system planning is an integral part of business planning. It
can be carried out in two ways. They are top-down planning and bottom-
up planning. Attaining a genuine dialogue is important because the
business professionals and the IT professionals each bring knowledge
and understanding essential for system success. Many IT professionals
have worked on different types of information systems and may be able
to suggest approaches the business professionals would not have
imagined.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1.____________ Information systems planning methodology that
attempts to gain a broad understanding of the information system needs
of the entire organization.

a) Bottom-up planning b) Top-Down Planning

c) Parallel planning d) system planning

2. ____________ Generic information systems planning methodology
that identifies and defines information system development projects
based upon solving operational business problems Discuss the
challenges in information system planning

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a) Bottom-up planning b) Top-Down Planning

c) Parallel planning d) System planning

3. Business _________ is the process of identifying the firm’s goals,
objectives and priorities, and developing action plans for the
accomplishing those goals and objectives.

a)Planning b) Organizing

c) Controlling d) Staffing
4. A medium for transporting output of a system to the input to another
system is_____________

a)Counter measure b) Interface

c) Parallel planning d) System planning

5. What part of documentations offers both a pictorial and written
description of system___________?

a) System's abstract b) System's narrative

c) Problem definition d) System's overview

GLOSSARY

System's abstract : An abstract system is a

system which exists in a
conceptual, abstract world. Abstract
systems are composed
from abstract components.

Bottom-up planning : Bottom-Up Planning is a method

of planning, defining objectives and
ways to achieve them through
the bottom up. First, relatively close
targets at lower levels of the
organizational hierarchy are set.
They are then gradually integrated
into the framework of global goals
and global strategy at higher and
higher levels.

Top-Down Planning : Top-down planning traditionally

involves defining organizational
goals on a high level and breaking
them down into specific objectives

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 which are then addressed in
phases. As the name indicates, top-
down planning is an approach that
aims at moving gradually from
the top to the lower levels of a given
hierarchy.

Interface : The term "interface" can refer to

either a hardware connection or
a user interface

Collaboration : Collaboration means 'to work with

another person or group in order to
achieve or do something'. That
sounds disarmingly simple. But then
when you strip back what business
is all about, it fundamentally comes
down to coordinating the efforts of
the company's employees to provide
goods and services.

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) b 2) a 3) a 4)b 5)d

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Unit 12

DEVELOPMENT OF INFORMATION
SYSTEM
STRUCTURE

Overview

Learning Objectives

12.1 Need for System Analysis and Design

12.2 Procedure of Analyzing Existing System

12.3 Steps in System Analysis and Design

12.4 Computer System Design

12.5 Data Specifications

Let Us Sum Up

Check Your Progress

Glossary

Suggested Readings

Answers to check your progress

OVERVIEW
Information system planning is part of business planning concerned with
deploying firm’s information systems resources, including people,
hardware and software. The late nineties have seen the revolutions in
information technology. The system analyst has now to play the role of
business analyst, technology expert and consultant, giving a solution to
the business needs of information requirement.
LEARNING OBJECTIVES

After reading this unit, you should be able to

• explain the need for system analysis and design
• list out the steps in system analysis and design
12.1 NEED FOR SYSTEM ANALYSIS AND DESIGN
When you are asked to computerize a system, as a requirement of the
data processing or the information need, it is necessary to analyze the
system from different angles. While satisfying such need, the analysis of
the system is the basic necessity for an efficient system design. The
need for analysis stems from the following point of view.

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System Objective
It is necessary to define the system objectives. Many a times, it is
observed that the systems are historically in operation and have lost
their main purpose of achievement of the objectives. The users of the
system and the personnel involved are not in a position to define the
objectives. Since you are going to develop a computer based system, it
is necessary to redefine or reset the objectives as a reference point in
the context of current business requirement.
System Boundaries
It is necessary to establish the system boundaries which would define
the scope and the coverage of the system. This helps to sort out and
understand the functional boundaries of the system, the department
boundaries in the system, and the people involved in the system. It also
helps to identify the inputs and the outputs of the various subsystems,
covering the entire systems.
System Importance
It is necessary to understand the importance of the system in the
organization. This would throw more light on its utility and would help the
designer to decide the design features of the system. It would be
possible then to position the system in relation to the other systems for
deciding the design strategy and development.
Nature of the System
The analysis of the system will help the system designer to conclude
whether the system is a closed type or an open, and a deterministic or a
probabilistic. Such an understanding of the system is necessary, prior to
design the process to ensure the necessary designing architecture.
Role of the System as an Interface
The system, many a times, acts as an interface to other systems. Hence
through such an interface, it activates or promotes some changes in the
other systems. It is necessary to understand the existing role of the
system, as an interface, to safeguard the interests of the other systems.
Any modifications or changes made should not affect the functioning or
the objectives of the other systems.
Participation of the Users
The strategic purpose of the analysis of the system is to seek the
acceptance of the people to a new development. System analysis
process provides a sense of participation of the people. This helps in
breaking the resistance to the new development and it also ensures the
commitment of the new system.

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Understanding of Resource Needs
The analysis of systems helps in defining the resource requirements in
terms of hardware and software. Hence, if any additional resources are
required, this would mean an investment. The management likes to
evaluate the investment from the point of view of return on such
investments. If the return on the investment is not attractive, the
management may drop the project.
Assessment of Feasibility
The analysis of the system helps to establish the feasibility from different
angles. The system should satisfy the technical, economic and
operational feasibility. Many times, the systems are feasible from the
technical and economic point of view; but they may be infeasible from
the operational point of view. The assessment of feasibility will save the
investment and the system designer’s time. It would also save the
embarrassment to the system designer as he is viewed as the key figure
in such projects.
12.2 PROCEDURE OF ANALYSING EXISTING SYSTEM
When the objectives of information system are finalized, as the first step
towards development, it is necessary to analyze the existing system.

Such an analysis helps in achieving the following:

• Understanding the existing system.
• Understanding the objectives achieved by the existing system.
• Evaluating the system for computerization and its placement in
the total MIS design.
• Knowing whether the system is feasible, technically and
operationally.
• Are the information needs fully justified?
• If so is the cost of system design justified to increase the value of
information.

The step-by step procedure for analyzing existing system is given below
1.Carry out the analysis of the system at a place where the system is
functioning. This step will ensure that the analyst is accepted as one of
those operating the system.
2.Note down the key personnel in the system besides the head of the
department. The key personnel are those who contribute towards the
system operations.
3.Spend some time with the operating personnel and observe the
system to understand the finer details of the system.

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4.Define the scope of the system and its objective. The scope will cover
the boundaries of the system. Further, one should identify the problems
faced in the system which cause difficulties in achieving the objective.
5.Collect all the documents which are raised in the system. These
documents carry data from one point to another. The documents could
be printed or handwritten. While collecting the documents, the analyst
should note down that raises the document, the purpose it achieves, and
the manner in which it is distributed.
6.Collect separately outputs such as the statements, reports, memos,
etc. made in the system to throw more light on the information it
generates. If these reports and the statements are sent to other
departments, make note of it. Also find out if any register or notebook is
maintained at previous points, which act as data storage and reference.
Note down against each such document, its use.
7.Make a list of rules, formulae, guidelines, policies, etc. which are used
in running the system.
8.Note down the check points and the controls used in the system to
ensure the data flow is complete, processing of the data is correct and
the analysis is precise.
9.Study the flow of data in the system in units, summary and aggregates
from document to document and from one stage to the other.
10.Make a small system note as a base document and seek an
appointment with each head of the department to discuss the system. In
the discussion, ensure that your system view and understanding is the
same as that of the head of the department. Ascertain from him whether
he has any other objectives which the system should achieve.

12.Examine whether the achievement of the systems objectives is

feasible in the present system. This means, examining whether
adequate data exists, whether it can be preceded by the rules, methods,
model, already there to generate information. If so, will the information
be correct, precise and complete. Further, can it be processed on time to
be useful to the user or the decision maker?
13.If there are problems in the feasibility of implementation, then
examine whether the present system can be modified with the
introduction of documents, controls, procedures and systems. If not,
redefine the scope of the system and objectives in the light study.

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14.Draw a revised system flowchart to indicate how the system runs the
major steps of processing the information. This chart should include all
the modifications which had been suggested and accepted.
15.Discuss the flowchart with the personnel operating the system so that
they understand the system. Impress upon them that they should run the
system as per the flowchart, and resist any deviations there from that
would cause a disturbance in the system. Explain the modified system in
such a way that the user would appreciate the changes.
16.Make a list of outputs containing information. Get the contents of the
reports approved by the head of the department.
17.Analyze the requirements of the information and reports from the
utility point of view. More the information, higher is the cost of
generation. Decide the utility based on the value of the information.

18.Compare the cost of the old and the new system, and benefit offered.
19.Obtain approval of the new system from the users and top
management.
20. Write a system manual for use of the people in the department and
for reference to the other users of the system.

12.3 STEPS IN SYSTEM ANALYSIS AND DESIGN

The Steps in system analysis and design are given below

Requirement Analysis
Requirement Definition

System Design

Input Design

Process Design

Output Design

System development

structuring the modules

Developing

Unit Testing

Integration of the Modules

System Testing

Implementation

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 Maintenance
The requirement analysis is carried out from the top downwards in the
organization hierarchy, linking the goals and the objectives of the
business organization, with the strategy mix decide to achieve them. In
this phase the information needs of the individuals, groups and functions
are analyzed from a decision making or a support point of view. Such
information needs would fully satisfy the operational and management
information needs. Once the needs are justified, the next step is to
define those clearer terms for the purpose of development. The
requirement definition brings clarity in the content and its application in
various ways.
The third step is to design a physical and a logical system through which
the outputs are designed. The processes which would give the outputs
are determined, and the data which would be required by these
processes is finalized in terms of definition, source, and quality. And
further, the collection, creation, validation, and storage of the input data
is also decided.
The fourth step is to break the system design into modules in the
hierarchical top-down structure to facilitate the development efforts as
well as its implementation.
Once the modules are developed, the unit testing is carried out to
confirm data transaction and outputs validity and accuracy. In testing,
the transaction level processes are checked to confirm the input-
process-output relation, and the data storage and the transaction level
updating.
When the unit testing is over and the module level processing is
confirmed, the modules are put together to generate the information as
determined in the requirement definition. The process of putting the
modules together is a process of integration. It is intended to produce
the results of data integration.
The system so developed is tested as a whole for several aspects such
as information, quality, performance, utility, user acceptance and so on.
Once the system testing is complete, the system is implemented at site,
on the hardware and software platform. The implementation step has its
own procedure starting from the installation of the hardware and the
software, training the users, and then shifting to a fully designed system.
While implementing the system some minor modifications, may be
required for ease of acceptance of the user.
Even after complete installation, the system may require modifications or
changes in terms of functions and features over a period of time. The
process of introducing these new requirements without disturbing the

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time tested basic system is called maintenance. Such changes are
required swiftly and hence they are required to be carried out very
easily. The system is designed keeping this natural requirement in post
implementation period.
A good system design and its implementation has high user acceptance
because it helps solve the problems in business performance, and
meets the information needs, within a sensible time scale, with an
assured quality and security of information.
Activity
Assume you have been asked to develop an information system for
processing the result of your class. Which method would you prefer for
developing such a system? Also conduct a feasibility study and prepare
a feasibility report
12.4 COMPUTER SYSTEM DESIGN
After analyzing the system by way of structured analysis, the next task of
the designer is to design a computer system. The computer system
design consists of five major steps, viz., designing the output, the input,
the processing, the data specifications, and the procedure specifications.
Output Design
The output should be able to communicate information to the users in
the organization effectively. The information, as an output, can be
printed, displayed or stored. If it is necessary to print the information, as
a report, then the designer has to decide the format of the report. If it is
to be displayed, then the designer has to provide a screen format.
The output design requires determining the reports, the screens, the
contents of the reports and the screen, and the layout of the contents.
While designing the report and the screen formats, the designer should
pay attention to the concepts of information presentation so that the
utility of the system is not reduced because of a noise, an information
overload, an incomplete coverage, an inadequate references, etc. The
attention should also be given to the security of information through
access control. The designer should decide an appropriate balance
between the print reports and the display screens. The layout of the
report, whether it is printed or displayed, must satisfy some basic
features. Each report should have an appropriate title with a period
reference, date of processing and a system title. The pages should
number, with the title repeated and at the end of the processing it should
provide the statistics such as number of records, items, etc.
The layout should be such that the readability will be from left to right
and from top to bottom. Each column and row should have meaningful
titles. The layout should provide sub-totals and grand totals with the

148
reference to the unit such as class, group or family. It should provide
suitable blank spaces to enhance readability. If any abbreviations are
used, the expanded forms should be given alongside. As far as possible,
the abbreviations should be universal and common to all reports to avoid
confusion. A good layout improves the utility of the information reports
by highlighting the areas of concern where the attention of the
management and its response is required immediately.
In many cases, the design of pre-printed forms is an easy solution for a
good layout .The use of the pre-printed stationary saves the printing time
and enforces standardization in the information layout. With the use of
the pre-printed stationary, the main user can blank out certain columns
and rows, or certain results to avoid an exposure to the unwanted users.
This saves the duplicate printing and the additional programming effort
required for it.
Input design
In this phase, the designer’s task is to identify those data items that will
be an input to the system. The designer finds a linkage to the input data
from the output. Once the data items are identified, it is necessary to find
the documents from where these data will be taken. A document
containing several data items will be treated as a record in the system.
To obtain the sales information, the system must consider the Order
Acceptance, the Invoice and the Debit Note records containing the
related data items.
The guidelines for selecting the data item from the document and
grouping them into a record are as follows:
1. Only the data items which have a current and a prospective use
should be included; the others should be ignored.
2. The data items from a document should be a grouped together and
arranged in logical order of its use in processing. For example, a
document number or a product code should be at the beginning of the
record.
3. The grouping of the data items should be in line with its application
and not in line with their placement in the report format. For example, the
invoice amount, the discount, the taxes, etc. should be grouped
together.

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Process Design
After the output and the input design, the designer has to develop a
process design which will specify the various steps that will convert input
data into outputs.
The process design deals with the following two types of processes, viz.,
computing and decision making.

1. Computation process for the net value of invoice:

Quantity*Rate = Amount

Amount+10 %( Amount) = Gross amount

Gross Amount+6% (Gross Amount) = Net value

2. Decision making for the choice of the invoice processing:

If the customer is of a type ‘Industry’ then follow the invoice

Process - A.
If the customer is of a type ‘Distributor’, then follow the invoice
process - B.
If the customer is of a type ‘OEM’ then follow the invoice process—C,
and so on.
As a part of the process design, the designer has to decide the source of
the data items, viz., the documents and the files will be used for storage
of the record and for retrieval, their organization becomes an important
factor. The designer classifies the files as master file(s) and transaction
files and also decides their use in the system in a logical sequence. The
files can be organized in a number of ways. The organization of the files
relates to the storage of data items and its recording layout on the
magnetic media.
The files can be organized either in random ordered fashion or in
indexed sequential fashion. Each file organization has its own
advantages related to access and processing. A data processing
situation dictates the type of the organization. In database environment,
data and records are arranged in a table form.
12.5 DATA SPECIFICATIONS
Having identified data items at atomic level and configuring them into a
set to form a record of an input entity, it is necessary to design
specifications for each data item. These specifications of the items will
be followed uniformly at all places wherever they are used. The
specification is expressed in terms of length of an item in terms of
characters, its nature in terms of numeric or alpha numeric known as

150
picture. A data item have some value and hence it would have some
conditions and validity.
For example, date is an item having eight characters, presented in
numeric value with two spaces after date and two spaces after month,
followed by a year mentioned in four numeric characters. The data will
not have null value and has no upper value. The order of data
presentation is day, month and year.
The specifications are used for error checking, control and processing. A
data item before it is accepted as an input is checked against
specifications. If there is a violation, it is corrected through a formal
process of editing before acceptance.
Procedure Design
This phase specifies how the computer system will function from data
entry to the output stage. The procedure indicates the logic of data
processing and the flow of system control from one step to the other.
Since the process design is complete, each process will be a step in the
procedure design of the computer system. Each of such processes will
be implemented through a computer program.
The procedure design steps will be shown in the computer system
flowchart. In all the system design procedures, there are broad steps
which are required to complete the design procedure.
A flow chart of the system using all the specifications of process design
and procedure design guides the designer, the analyst and the
programmer in developing the system. It provides a logical overview of
the system. The guidelines for drawing the system flow chart are as
under:
1. Identify the start and the end of the system.
2. Identify the inputs, in terms of the data and the documents entering
in the system, in their logical order. Determine the transaction and the
master files in the system.
3. Identify the output at each stage and decide the media for
processing and storage.

LET US SUM UP
System analysis plays a vital role in the development of information
systems. The major activities in system analysis and design are
requirement analysis, requirement definition, system design, system
development, unit testing system testing, implementation and
maintenance.

151
CHECK YOUR PROGRESS

Choose the Correct Answer:

1. _________ Specifies the various steps that will convert input data into

outputs.

a) Input design b) Output Design

c) Process Design d) Procedure Design

2. _________ indicates the logic of data processing and the flow of
system control from one step to the other.

a) Input design b) Output Design

c) Procedure Design d) Process Design

3.The _________ are used for error checking, control and processing
data.
a) Input design b) Output Design

c) Data Specifications d) Process Design

4. Which of the following activities does not belong to the implementation
phase of the SDLC?

a) Program testing b) Output Design

c) Data Specifications d) Process Design

5. In the ___________ designer’s task is to identify those data items that
will be an input to the system.

a) Input design b) Output Design

c) Procedure Design d) Process Design

GLOSSARY

System Design : System design is the process of

defining the components, modules,
interfaces, and data for a system to
satisfy specified
requirements. System development
is the process of creating or altering
systems, along with the processes,
practices, models, and
methodologies used to develop
them.

152
Data Specifications : In computing, a data definition
specification (DDS) is a guideline to
ensure comprehensive and
consistent data definition. A
comprehensive data definition
specification encompasses
enterprise data the hierarchy
of data management, prescribed
guidance enforcement and criteria
to determine compliance.

System Analysis : Systems analysis is "the process of

studying a procedure or business in
order to identify its goals and
purposes and create systems and
procedures that will achieve them in
an efficient way". The field of system
analysis relates closely to
requirements analysis or to
operations research.

Procedure Design : Procedures are the rules, standards,

methods design to increase the
effectiveness of the information
system. The procedures detail about
the tasks to be performed in using
the system. They serve as the ready
recovers for the designers as well
as for the users.

Maintenance: : Maintenance is the process of

maintaining something or
somebody. It may mean the state of
being maintained. The term also
refers to looking after somebody
financially, i.e., the provision of
financial support of a person.
Specifically, providing them with
living expenses.

Unit Testing : Unit testing is a type of software

testing where individual units or

153
 components of software are tested.
The purpose is to validate that each
unit of the software code performs
as expected. Unit Testing is done
during the development (coding
phase) of an application by the
developers

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) c 2) c 3) c 4) a 5)a

154
Unit 13

OVERVIEW OF ALTERNATIVE
APPLICATION
STRUCTURE

Overview

Learning Objectives

13.1 Traditional System Life cycle

13.2 Prototyping

Let Us Sum Up
Check Your Progress

Glossary

Suggested Readings

Answers to check your progress

OVERVIEW
One important thing to know about building a new information system is
that this process is one kind of planned organizational change. System
builders must understand how a system will affect the organization as a
whole.
LEARNING OBJECTIVES

After reading this unit, you should be able to,

• explain the stages in traditional systems life cycle
• discuss the steps in prototyping.

13.1 TRADITIONAL SYSTEMS LIFECYCLE

The systems lifecycle is the oldest method for building information
systems and is still used today for medium or large complex systems
projects. The lifecycle for an information system has six stages:

(1) Project definition,

(2) Systems study,

(3) Design,

(4) Programming,

(5) Installation, and

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(6) Post implementation. Figure below illustrates these stages. Each
stage consists of basic activities that must be performed before the next
stage can begin. The lifecycle methodology has a very formal
division of labour 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 technical staff’s work.

Figure 13.1 Stages of the Systems Lifecycle

Stages of the Systems Lifecycle

The project definition 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. The systems study
stage analyzes the problems of existing systems (manual or automated)
in detail, identifies objectives to be attained by a solution to these
problems, and describes alternative solutions. Much of the information
gathered during the systems study phase will be used to determine
information system requirements.

156
The design stage produces the design specifications for the solution.
The lifecycle emphasizes formal specifications and paperwork, so many
design documents are generated during this stage. The programming
stage translates the design specifications produced during the design
into software program code. Systems analysts work with programmers
to prepare specifications for each program in the system.
The installation stage consists of the final steps to put the new or
modified system into operation: testing, training, and conversion. The
post implementation stage consists of using and evaluating the systems
after it is installed and is in production. 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 lifecycle comes to an end, a completely new system
is called for and the lifecycle may begin again.

Limitations of the Lifecycle Approach

The systems lifecycle is still useful for building large complex systems
that require a rigorous and formal requirements analysis, predefined
specifications, and tight controls over the systems-building process.
However, the systems lifecycle approach is costly, time consuming, and
inflexible. Volumes of new documents must be generated and steps
repeated if requirements and specifications need to be revised. Because
of the time and cost to repeat the sequence of lifecycle activities, the
methodology encourages freezing of specifications early in the
development process, discouraging change. The lifecycle approach is
also not suitable for many small desktop systems, which tend to be less
structured and more individualized.

13.2 PROTOTYPING
Prototyping consists of building an experimental system rapidly and
inexpensively for end users to evaluate. By interacting with the
prototype, users can get a better idea of their information requirements.
The prototype endorsed by the users can be used as a template to
create the final system.
The prototype is a working version of an information system or part of
the system, but it is meant to be only a preliminary model. Once

157
operational, the prototype will be further refined until it conforms
precisely to users’ requirements. Once the design has been finalized,
the prototype can be converted to a polished production system.
The process of building a preliminary design, trying it out, refining it, and
trying again has been called an iterative process of systems
development because the steps required to build a system can be
repeated over and over again. Prototyping is more explicitly iterative
than the conventional lifecycle, and it actively promotes system design
changes. It has been said that prototyping replaces unplanned rework
with planned iteration, with each version more accurately reflecting
users’ requirements.

Steps in Prototyping
Below figure shows a four-step model of the prototyping process, which
consists of the following:

Figure 13.2 Steps in Prototyping

Step 1: Identify the user’s basic requirements. The system designer
(usually an information systems specialist) works with the user only long
enough to capture his or her basic information needs.
Step 2: Develop an initial prototype. The system designer creates a
working prototype quickly, using fourth-generation software, interactive
multimedia, or computer aided software engineering (CASE) Tools.

158
Step 3: Use the prototype. The user is encouraged to work with the
system in order to determine how well the prototype meets his or her
needs and to make suggestions for improving the prototype.
Step 4: Revise and enhance the prototype. The system builder notes all
changes the user requests and refines the prototype accordingly. After
the prototype has been revised, the cycle returns to Step 3. Step 3 and 4
are repeated until the user is satisfied.
When no more iterations required, the approval prototype then becomes
an operational prototype that furnishes the final specifications for the
application. Sometimes the prototype itself is adopted as the production
version of the system.

Advantages and Disadvantages of Prototyping

Prototyping is most useful when there is some uncertainty about
requirements or design solutions. Prototyping is especially helpful in
designing an information system’s end-user interface (the part of the
system that end users interact with, such as on-line display and data-
entry screens, reports, or Web pages). When prototyping encourages
end-user participation in building a system, it is more likely to produce
systems that fulfill user requirements.
However, rapid prototyping can gloss over essential steps in systems
development. If the completed prototype works reasonably well,
management may not believe there is a need for reprogramming,
redesign, or full documentation and testing to build a polished production
system. Some of these hastily constructed systems may not easily
accommodate large quantities of data or a large number of users in a
production environment. Prototyping may also slow the development
process if there are large numbers of end users to satisfy.

LET US SUM UP
The traditional systems life-cycle--the oldest method for building
systems--breaks the development of an information system into six
formal stages:
(1) Project definition, (2) systems study, (3) design, (4) Programming, (5)
installation, and (6) post implementation. The stages must proceed
sequentially and have defined outputs; each requires formal approval
before the next stage can commence. The system lifecycle is useful for
large projects that need formal specifications and tight management
control over each stage of system-building. However, this approach is
very rigid and costly and is not well suited for unstructured, decision-

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oriented applications where requirements cannot be immediately
visualized.
Prototyping consists of building an experimental system rapidly and
inexpensively for end users to interact with and evaluate. The prototype
is refined and enhanced until users are satisfied that it includes all of
their requirements and can be used as a template to create the final
system. Prototyping encourages end-user involvement in systems
development and iteration of design until specifications are captured
accurately. The rapid creation of prototypes can result in systems that
have not been completely tested or documented or that are technically
inadequate for a production environment.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1. The _________stage consists of the final steps to put the new or

modified system into operation: testing, training, and conversion.

a) Installation b) Programming

c) Post implementation d)Prototyping

2. _________stage consists of using and evaluating the systems after it

is installed and is in production.

a) Installation b) Programming

c) Post implementation d) Prototyping

3. The __________ stage translates the design specifications produced

during the design into software program code.

a) Installation b) Programming

c) Post implementation d)Prototyping

4. ________ consists of building an experimental system rapidly

and inexpensively for end users to interact with and evaluate.

a) Installation b) Programming

c) Post implementation d)Prototyping

5. The _________ stage produces the design specifications for the

solution

a) Installation b) Programming

c) Post implementation d) System design

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GLOSSARY

Post implementation : A Post Implementation review is

conducted after completing the
project. Its activities aim to
evaluate whether project objectives
were met, how effectively the
project was run, lessons for the
future, and the actions required to
maximize the benefits from the
project outputs

System testing : System testing is defined

as testing of a complete and fully
integrated software product.
This testing falls in black-
box testing wherein knowledge of
the inner design of the code is not
a pre-requisite and is done by
the testing team.

Installation : Installation refers to the particular

configuration of a software or
hardware with a view to making it
usable with the computer. A soft or
digital copy of the piece of software
(program) is needed to install it.
There are different processes
of installing a piece of software
(program).

System design : System design is the process of

defining the components, modules,
interfaces, and data for a system to
satisfy specified
requirements. System development
is the process of creating or
altering systems, along with the
processes, practices, models, and
methodologies used to develop
them.

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Programming : Programming is the process of
creating a set of instructions that
tell a computer how to perform a
task. Programming can be done
using a variety of
computer programming languages,
such as JavaScript, Python, and
C++.

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) a 2) c 3) b 4)d 5)d

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Unit 14

ALTERNATIVE APPLICATION
DEVELOPMENT APPROACH
STRUCTURE

Overview

Learning Objectives

14.1 Application Software Package

14.2 End-User Development

14.3 Outsourcing
Let Us Sum Up

Check Your Progress

Glossary

Suggested Readings
Answers to check your progress

OVERVIEW
Systems differ in terms of their size and technological complexity, and in
terms of the organizational problems they are meant to solve. Because
there are different kinds of systems, a number of methods have been
developed to build systems. This unit describes these alternative
methods: the traditional systems, prototyping, application software
packages, end-user development, and outsourcing.

LEARNING OBJECTIVES

After reading this unit, you should be able to,

• list out the benefits of end user development and outsourcing.
• demonstrate the application of various software packages
• identify the appropriate software for user.

14.1 APPLICATION SOFTWARE PACKAGES

Information systems can be built using software from application
software packages. There are many applications that are common to all
business organizations--for example, payroll, accounts receivable,
general ledger, or inventory control, For such universal functions with
standard procedures, a generalized system will fulfill the requirements of
many organizations.

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If a software package can fulfill most of an organization’s requirements,
the company does not have to write its own software. The company can
save time and money by using the prewritten, predesigned, pretested
software programs from the package. Package vendors supply much of
the ongoing maintenance and support for the system, providing
enhancements to keep the system in line with ongoing technical and
business developments.
If an organization has unique requirements that the package does not
address, many packages include capabilities for customization.
Customization features, allow a software package to be modified to meet
an organization’s unique requirements without destroying the imaginary
of the packaged software. If a great deal of customization is required,
additional programming and customization work may become so
expensive and time consuming that they eliminate many of the
advantages of software packages. The initial purchase price of the
package can be deceptive because of these hidden implementation
costs.

Selecting Software Packages

When a system is developed using an application software package,
systems analysis will include a package evaluation effort. The most
important evaluation criteria are the functions provided by the package,
flexibility, user-friendliness, hardware and software resources, database
requirements, installation and maintenance effort, documentation,
vendor quality, and cost. The package evaluation process often is based
on a Request for proposal (REP), which is a detailed list of questions
submitted to packaged software vendors.
When a software package solution is selected, the organization no
longer has total control over the system design process. Instead of
tailoring the system design specifications directly to user requirements,
the design effort will consist of trying to mold user requirements to
conform to the features of the package. If the organization’s
requirements conflict with way the package works and the package
cannot be customized, the organization will have to adapt to the
package and change its procedures.

14.2 END-USER DEVELOPMENT

Some types of information systems can be developed by end users with
little or no formal assistance from technical specialists. This
phenomenon is called end-user development. Using fourth-generation
languages, graphics languages, and PC software tools, end users can

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access data, create reports, and develop entire information systems on
their own, with little or no help from professional systems analysts or
programmers. Many of these end-user developed systems can be
created much more rapidly than with the traditional systems, lifecycle.
Below figure illustrates the concept of end-user development.

Figure 14.1 End user development cycle

Benefits and Limitations of End-User Development

Many organizations have reported gains in application development
productivity by using fourth-generation tools that in a few cases have
reached 300 to 500 percent. (Glass, 1999; Green, 1984-85; Harel,
1985). Allowing users to specify their own business needs improves
requirements gathering and often leads to a higher level of user
involvement and satisfaction with the system. However, fourth-
generation tools still cannot replace conventional tools for some
business applications, because they cannot easily handle the processing
of large numbers of transactions of applications with extensive
procedural logic and updating requirements.
End-user computing also poses organizational risks because it occurs
outside of traditional mechanisms for information system management
and control. When systems are created rapidly, without a formal
development methodology, testing and documentation may be
inadequate. Control over data can be lost in systems outside the

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traditional information systems department. When users create their own
applications and files, it becomes increasingly difficult to determine
where data are located and to ensure that the same piece of information
is used consistently throughout the organization.

Managing End-User Development

To help organizations maximize the benefits of end-user applications
development, management should control the development of end-user
applications by requiring cost justifications of end-user information
system projects and by establishing hardware, software, and quality
standards for user-developed applications.
When end-user computing first became popular, organizations used
information centers to promote standards for hardware and software so
that end users would not introduce many disparate and incompatible
technologies into the firm (Fuller and Swanson, 1992). Information
centers are special facilities housing hardware, software, and technical
specialists to supply end users with tools, training, and expert advice so
they can create information system applications on their own or increase
their productivity. The role of information centers is diminishing as end
users become more computer literate, but organizations still need to
closely monitor and manage end-user development.

14.3 OUTSOURCING
If a firm does not want to use its internal resources to build or 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 center operations, telecommunications
networks, or applications development to external vendors is called
outsourcing. Subscribing companies use the software and computer
hardware provided by the application service provider as the technical
platform for their system. In another form of outsourcing, a company
hires an external vendor to design and create the software for its
system, but that company would operate the system on its own
computer. The Window on Management describes how one start-up
company benefited from outsourcing its Web site.
Outsourcing has become popular because some organizations perceive
it as more cost-effective than maintaining their own computer center or
information systems staff. The provider of outsourcing services benefits
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

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a company with fluctuating needs for computer processing to pay for
only what it uses rather than to build its own computer, center, which
would be underutilized when there is no peak load. Some firms
outsource because their internal information systems staff cannot keep
pace with technological change or innovative business practices or
because they want to free up scarce and costly talent for activities with
higher payback.
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. When a firm allocates the responsibility
for developing and operating its information systems to another
organization. It loses control over its information systems function. If the
organization lacks the expertise to negotiate a sound contract, the firm’s
dependency on the vendor could result in high costs or loss of control
over technological direction. Firms should be especially cautious when
using an outsourcer to develop or to operate applications that give it
some type of competitive advantage.

Activity
Some have said that the best way to reduce system development costs
is to use application software packages. Do you agree? Why or why
not?

LET US SUM UP
Developing an information system using an application software
package eliminates the need for writing software programs when
developing an information system. Using a software package cuts down
on the amount of design, testing, installation, and maintenance work
required to build a system. Application software packages are helpful if a
firm does not have the internal information systems staff or financial
resources to custom-develop a system. To meet an organization’s
unique requirements, package may require extensive modifications that
can substantially raise development costs.
End-user development is the development of information systems by
end users, either alone or with minimal assistance from information
systems specialists. End-users developed systems can be created
rapidly and informally using fourth-generation software tools. The
primary benefits of end-user development are improved requirements
determination, reduced application backlog, and increased end-user
participation in, and control of, the systems development process.
However, end-user development, in conjunction with distributed

167
computing, has introduced new organizational risks by propagating
information systems and data resources that do not necessarily meet
quality assurance standards and that are not easily controlled by
traditional means.
Outsourcing consists of using an external vendor to build (or operate) a
firm’s information systems. The work is done by the organization’s
internal information systems staff. Outsourcing can save application
development costs or allow firms to develop applications without an
internal information systems staff. However, firms risk losing over their
information systems and becoming too dependent on external vendors.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1.___________ is a detailed list of questions submitted to packaged
software vendors

a) Request for proposal b) internet protocol

c) Domain name d) Spoofing

2.The process of turning over an organization’s computer center
operations, telecommunications networks, or applications development
to external vendors is called _______________

a)Outsourcing b) Internal Resourcing

c) Internal audit d) System testing

3. __________ are special facilities housing hardware, software,

and technical specialists to supply end users with tools, training, and

expert advice.

a) Information centers b) Outsourcing

c) Remote sensing d) Internal Resourcing

4.The document listing all procedure and regulations that generally govern
an organization is the___________

a) Administrative policy manual b) Personal policy book

c) Procedures log d) Organization manual

5.During what phase, the requirements analysis is
performed___________

a) System investigation phase b) System analysis phase

c) System development phase d) System design phase

168
GLOSSARY

System life cycle : System life cycle (SLC) is an

organizational process of
developing and
maintaining systems. It helps in
establishing a system project plan,
because it gives overall list of
processes and sub-processes
required for developing a system

System testing : System testing is defined

as testing of a complete and fully
integrated software product.
This testing falls in black-
box testing wherein knowledge of
the inner design of the code is not
a pre-requisite and is done by
the testing team.

Unit testing : Unit Testing is a type of software

testing where individual units or
components of a software are
tested. The purpose is to validate
that each unit of the software code
performs as expected. Unit Testing
is done during the development
(coding phase) of an application by
the developers

Outsourcing : Outsourcing is the practice of

passing individual tasks, subareas,
or business processes over to a
third-party and thereby receiving
the results from outside of your
own company. Services that your
company was responsible for
fulfilling will now be provided by a
specialized service provider.

Procedures log : Identifying someone trying to

169
 establish a connection to a
computer. During logon
procedures, two requests are made
from the individual trying to gain
access: a preauthorized account
(or user) name and a preset
password

Information centers : A place where members of

the public can obtain information
regarding an area, organisation
activity etc.

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1) a 2) a 3) a 4)d 5)b

170
 BLOCK 5

SECURITY AND ETHICAL

CHALLENGES

Unit 15: Security and Ethical Challenges

Unit 16: Societal Challenges of Information
System

171
Unit 15

SECURITY AND ETHICAL CHALLENGES

STRUCTURE

Overview

Learning Objectives

15.1 Security and Ethical Challenges

15.2 IS Control: Facility control & Procedural Control

15.3 Application Reliability and Data Entry Controls

15.4 Types of Spoofing

Let us sum up

Check Your Progress

Glossary

Suggested Readings

Answers to check your progress

OVERVIEW
Any business faces social and ethical challenges in this society.
Information system as well faces various challenges. Overcoming these
have paved way for a successful development of IS. This unit details out
various IS control and ethics for IS professional.

LEARNING OBJECTIVES

After reading this unit, you should be able to,

• define IS and the ethical challenges
• explain the IS control procedures

15.1 SECURITY AND ETHICAL CHALLENGES

Ever get the feeling somebody is trailing you on the Web, watching your
every click? Wonder why you start seeing display ads and pop-ups just
after you’ve been scouring the Web for a car, a dress, or cosmetic
product? Well, you’re right: your behavior is being tracked, and you are
being targeted on the Web so that you are exposed to certain ads and
not others. The Web sites you visit track the search engine queries you
enter, pages visited, Web content viewed, ads clicked, videos watched,
content shared, and the products you purchase. Google is the largest
Web tracker, monitoring thousands of Web sites. As one wag noted,

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Google knows more about you than your mother does. In March 2009,
Google began displaying ads on thousands of Google-related Web sites
based on their previous online activities. To parry a growing public
resentment of behavioral targeting, Google said it would give users the
ability to see and edit the information that it has compiled about their
interests for the purposes of behavioral targeting. Behavioral targeting
seeks to increase the efficiency of online ads by using information that
Web visitors reveal about themselves online, and if possible, combine
this with offline identity and consumption information gathered by
companies such as Acxiom.
The growing use of behavioral targeting techniques shows that
technology can be a double-edged sword. It can be the source of many
benefits (by showing you ads relevant to your interests) but it can also
create new opportunities for invading your privacy, and enabling the
reckless use of that information in a variety of decisions about you.
Online advertising titans like Google, Microsoft, and Yahoo are all
looking for ways to monetize their huge collections of online behavioral
data. While search engine marketing is arguably the most effective form
of advertising in history, banner display ad marketing is highly inefficient
because it displays ads to everyone regardless of their interests. Hence
the search engine marketers cannot charge much for display ad space.
However, by tracking the online movements of 200 million U.S. Internet
users, they can develop a very clear picture of who you are, and use that
information to show you ads that might be of interest to you. This would
make the marketing process more efficient and more profitable for all the
parties involved. But this solution also creates an ethical dilemma, pitting
the monetary interests of the online advertisers and search engines
against the interests of individuals to maintain a sense of c ontrol over
their personal information and their privacy. Two closely held values are
in conflict here. As a manager, you will need to be sensitive to both the
negative and positive impacts of information systems for your firm,
employees, and customers. You will need to learn how to resolve ethical
dilemmas involving information systems.

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 Figure 15.1 Ethical Challenges
Ethics refers to the principles of right and wrong that individuals, acting
as free moral agents, use to make choices to guide their behaviors.
Information systems raise new ethical questions for both individuals and
societies because they create opportunities for intense social change,
and thus threaten existing distributions of power, money, rights, and
obligations. Like other technologies, such as steam engines, electricity,
the telephone, and the radio, information technology can be used to
achieve social progress, but it can also be used to commit crimes and
threaten cherished social values. The development of information
technology will produce benefits for many and costs for others. Ethical
issues in information systems have been given new urgency by the rise
of the Internet and electronic commerce. Internet and digital firm
technologies make it easier than ever to assemble, integrate, and
distribute information, unleashing new concerns about the appropriate
use of customer information, the protection of personal privacy, and the
protection of intellectual property. Other pressing ethical issues raised by
information systems include establishing accountability for the
consequences of information systems, setting standards to safeguard
system quality that protects the safety of the individual and society, and
preserving values and institutions considered essential to the quality of
life in an information society. When using information systems, it is
essential to ask, “What is the ethical and socially responsible course of
action?”

15.2 FACILITY CONTROL AND PROCEDURAL CONTROL

Controls are constraints and other restrictions imposed on a user or a
system, and they canbe used to secure systems against the risks just

174
discussed or to reduce damage caused to systems, Applications, and
data.
Controls are implemented not only for access but also to implement
policies and ensure that nonsensical data is not entered into corporate
databases.
Physical facility control is methods that protect physical facilities and
their contents from loss and destruction. Computer centers are prone to
many hazards such as accidents, thefts, fire, natural disasters,
destructions etc. Therefore, physical safeguards and various control
procedures are required to protect the hardware, software and vital data
resources of computer using organizations.
Procedural control methods provide maximum security to operation of
the information system. Standard procedures are developed and
maintained manually and built in software help display so that everyone
knows what to do. It promotes uniformity and minimize the chance of
error and fraud. It should be kept up to date so that correct processing of
each activity is made possible.
15.3 APPLICATION RELIABILITY AND DATA ENTRY CONTROLS
The most reliable programs consider every possible misuse or abuse. A
highly reliable program includes code that promptly produces a clear
message if a user either makes an error or tries to circumvent a process.
For example, a Web site invites users to select a username and
password, and the operators demand passwords that are not easy to
guess. The application should be programmed to reject any password
that has fewer than a certain number of characters or does not include
numerals. A clear message then must be presented, inviting the user to
follow the guidelines.
Controls also translate business policies into system features. For
example, Blockbuster Video uses its IS to implement a policy limiting
debt for each customer to a certain level. When a renter reaches the
debt limit and tries to rent another DVD, a message appears on the cash
register screen: “Do not rent!” Thus, the policy is implemented by using a
control at the point of sale. Similar systems do not allow any expenditure
to be committed unless a certain budgetary item is first checked to
ensure sufficient allocation. A spending policy has been implemented
through the proper software.

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Access Controls
Unauthorized access to information systems, usually via public networks
such as the Internet, does not always damage IT resources. However, it
is regarded as one of the most serious threats to security because it is
often the prelude to the destruction of Web sites, databases, and other
resources, or theft of valuable information.
Access controls are measures taken to ensure that only those who are
authorized have access to a computer or network, or to certain
applications or data. One way to block access to a computer is by
physically locking it in a facility to which only authorized users have a
key or by locking the computer itself with a physical key. However, in the
age of networked computers, this solution is practical only for a limited
number of servers and other computers. Therefore, these organizations
must use other access controls, most of which rely on software. Experts
like to classify access controls into three groups: what you know, what
you have, and who you are.
1. “What you know” includes access codes such as user IDs, account
numbers, and passwords.
2. “What you have” is some kind of a device, such as a security card,
which you use directly, or which continuously changes coordinated
access codes and displays them for you.

3. “Who you are” includes your unique physical characteristics.

The most common way to control access is through the combination of a
user ID and a password. While user IDs are usually not secret,
passwords are. IS managers encourage users to change their
passwords frequently, which most systems easily allow, so that others
do not have time to figure them out and to limit the usefulness of stolen
passwords. Some organisations have systems that force users to
change their passwords at preset intervals, such as once a month or
once every three months. Some systems also prevent users from
selecting a password that they have used in the past, to minimise the
chance that someone else might guess it, and many require a minimum
length and mix of characters and numerals. Access codes and their
related passwords are maintained either in a special list that becomes
part of the operating system or in a database that the system searches
to determine whether a user is authorised to access the requested
resource.
A more secure measure than passwords is security cards, such as
RSA’s SecureID. The device is distributed to employees who need

176
access to confidential databases, usually remotely. Employees receive a
small device that displays a 6-digit number. Special circuitry changes the
number both at the server and the device to the same new number
every minute. To gain access, employees enter at least one access
code and the current number. The device is small enough to be carried
on a key chain or in a wallet. This two-factor access control increases
the probability that only authorised people gain access. This is an
example of using both what you know and what you have.
In recent years, some companies have adopted physical access controls
called bio-metrics. A bio-metric characteristic is a unique physical,
measurable characteristic of a human being that is used to identify a
person. Characteristics such as fingerprints, retinal scans, or voice prints
can be used in bio-metrics. They are in the class of “who you are.” When
a fingerprint is used, the user presses a finger on a scanner or puts it
before a digital camera. The fingerprint is compared against a database
of digitised fingerprints of people with authorised access. A growing
number of laptop computers have a built-in fingerprint scanner for the
same purpose. The procedure is similar when the image of a person’s
retina is scanned. With voice recognition, the user is instructed to utter a
word or several words. The intonation and accent are digitised and
compared with a list of digitised voice samples.

Risk to Online Operations

• Massive movement of operation to the internet has attracted
hackers who try to interrupt such operation daily.
• To unauthorized access, data theft, and defacing of web pages.
There has been a surge in denial of service attacks hijacking of
computers

Denial of Service (DOS):

• Too many requests are received to log on to a Web site’s pages
• If perpetrated from multiple computers it is called distributed
denial of service (DDOS)
A “denial of service” or DoS attack is used to tie up a website’s
resources so that users who need to access the site cannot do so. Many
major companies have been the focus of DoS attacks. Because a
DoSattack can be easily engineered from nearly any location, finding
those responsible can be extremely difficult.
A bit of history: The first DoS attack was done by 13-year-old David
Dennis in 1974. Dennis wrote a program using the “external” or “ext”

177
command that forced some computers at a nearby university research
lab to power off
DoS attacks have evolved into the more complex and sophisticated
“distributed denial of service” (DDoS) attacks. The biggest attack ever
recorded — at that time — targeted code-hosting-service GitHub in
2018. We’ll discuss DDoS attacks in greater detail later in this article.
Attackers include hacktivists (hackers whose activity is aimed at
promoting a social or political cause), profit-motivated cybercriminals,
and nation states.

Denial of service attacks explained

DoS attacks generally take one of two forms. They either flood web
services or crash them.

Flooding attacks
Flooding is the more common form DoS attack. It occurs when the
attacked system is overwhelmed by large amounts of traffic that the
server is unable to handle. The system eventually stops.
An ICMP flood — also known as a ping flood — is a type of DoS attack
that sends spoofed packets of information that hit every computer in a
targeted network, taking advantage of misconfigured network devices.
A SYN flood is a variation that exploits a vulnerability in the TCP
connection sequence. This is often referred to as the three-way
handshake connection with the host and the server. Here’s how it works:
The targeted server receives a request to begin the handshake. But, in a
SYN flood, the handshake is never completed. That leaves the
connected port as occupied and unavailable to process further requests.
Meanwhile, the cybercriminal continues to send more and more
requests, overwhelming all open ports and shutting down the server.

Crash attacks
Crash attacks occur less often, when cybercriminals transmit bugs that
exploit flaws in the targeted system. The result? The system crashes.
Crash attacks — and flooding attacks — prevent legitimate users from
accessing online services such as websites, gaming sites, email, and
bank accounts.

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How a DoS attack works
Unlike a virus or malware, a DoS attack doesn’t depend on a special
program to run. Instead, it takes advantage of an inherent vulnerability in
the way computer networks communicate.
Here’s an example. Suppose you wish to visit an e-commerce site in
order to shop for a gift. Your computer sends a small packet of
information to the website. The packet works as a “hello” – basically,
your computer says, “Hi, I’d like to visit you, please let me in.”
When the server receives your computer’s message, it sends a short
one back, saying in a sense, “OK, are you real?” Your computer
responds — “Yes!” — and communication is established.
The website’s homepage then pops up on your screen, and you can
explore the site. Your computer and the server continue communicating
as you click links, place orders, and carry out other business.
In a DoS attack, a computer is rigged to send not just one “introduction”
to a server, but hundreds or thousands. The server — which cannot tell
that the introductions are fake — sends back its usual response, waiting
up to a minute in each case to hear a reply. When it gets no reply, the
server shuts down the connection, and the computer executing the
attack repeats, sending a new batch of fake requests.
DoS attacks mostly affect organizations and how they run in a
connected world. For consumers, the attacks hinder their ability to
access services and information.

How to help prevent DoS attacks?

If you rely on a website to do business, you probably want to know about
DoS attack prevention.
A general rule: The earlier you can identify an attack-in-progress, the
quicker you can contain the damage. Here are some things you can do.

Method 1: Get help recognizing attacks

Companies often use technology or anti-DDoS services to help defend
themselves. These can help you recognize between legitimate spikes in
network traffic and a DDoS attack.

Method 2: Contact your Internet Service provider

If you find your company is under attack, you should notify your Internet
Service Provider as soon as possible to determine if your traffic can be
rerouted. Having a backup ISP is a good idea, too. Also, consider

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services that can disperse the massive DDoS traffic among a network of
servers. That can help render an attack ineffective.

Method 3: Investigate black hole routing

Internet service providers can use “black hole routing.” It directs
excessive traffic into a null route, sometimes referred to as a black hole.
This can help prevent the targeted website or network from crashing.
The drawback is that both legitimate and illegitimate traffic is rerouted in
the same way.

Method 4: Configure firewalls and routers

Firewalls and routers should be configured to reject bogus traffic.
Remember to keep your routers and firewalls updated with the latest
security patches.

Method 5: Consider front-end hardware

Application front-end hardware that’s integrated into the network before
traffic reaches a server can help analyze and screen data packets. The
hardware classifies the data as priority, regular, or dangerous as they
enter a system. It can also help block threatening data.

Spoofing
Spoofing is a type of scam in which criminals attempt to obtain
someone's personal information by pretending to be a legitimate
business, a neighbor, or some other innocent party.

How Spoofing Works?

There are several kinds of spoofing, including email spoofing, text
message spoofing, caller ID spoofing, and URL and GPS spoofing. In
short, if there's a form of online communication, spoofers are trying to
scam their way into it—and into your identity and your assets.

Special Considerations
Be skeptical whenever you receive a message asking for personal
information and only download files from trusted sources. Install antivirus
software on any computers you use and keep it up to date.
If you get an inquiry seeking personal information, don’t provide it. Hang
up (or log off) and then look up the phone number or customer service
email address from the entity purportedly contacting you for your
personal information.
If you think you’ve been spoofed, you can file a complaint at the FCC's
Consumer Complaint Center. The FCC doesn't act on individual

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complaints but will add that information to its database. If you've lost
money because of spoofing, the FCC recommends contacting your local
police.

15.4 TYPES OF SPOOFING

Email Spoofing
Sometimes referred to as phishing, this tactic is used by both dishonest
advertisers and outright thieves. The spoofer sends out emails with a
falsified “From:” line to try to trick victims into believing that the message
is from a friend, their bank, or some other legitimate source. Any email
that asks for your password, Social Security number, or any other
personal information could be a trick.

Text Message Spoofing

Sometimes referred to as smishing, this is similar to email spoofing. The
text message may appear to come from a legitimate source, such as
your bank. It may request that you call a certain phone number or click
on a link within the message, with the goal of getting you to divulge
personal information.

Caller ID Spoofing
Here, the spoofer falsifies the phone number from which they are calling
in hope of getting you to take their call. On your caller ID, it might appear
that the call is coming from a legitimate business or government agency,
such as the Internal Revenue Service. Note that the IRS says it doesn't
call taxpayers to tell them they owe taxes without first sending them a bill
in the mail.
Neighbor Spoofing
This is a type of caller ID spoofing in which the call will appear to be from
someone you know or a person who lives near you. The Federal
Communications Commission (FCC) says that the Truth in Caller ID Act
prohibits "anyone from transmitting misleading or inaccurate caller ID
information with the intent to defraud, cause harm or wrongly obtain
anything of value." If they're caught (and that's a big "if"), the spoofer can
face penalties of up to $10,000 for each violation.

URL Spoofing
URL spoofing happens when scammers set up a fraudulent website to
obtain information from victims or to install malware on their computers.
For instance, victims might be directed to a site that looks like it belongs
to their bank or credit card company and be asked to log in using their

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user ID and password. If the person falls for it and actually logs in, the
scammer could use the information the victim typed in to log into the real
site and access their accounts.

GPS Spoofing
GPS spoofing has a somewhat different purpose. It attempts to trick a
GPS receiver into believing it is in a different location or headed in a
different direction, by broadcasting bogus GPS signals or other means.
At this point, GPS spoofing is more likely to be used in warfare or by
gamers than to target individual consumers, although the technology
exists to make anyone vulnerable.

LET US SUM UP
Information system has various societal and Ethical challenges. There
are two types of IS control Procedural Control and Facility control. There
are 5 moral dimensions on societal challenges on IS. They are
Information rights and obligations, Property rights and obligations,
Accountability and control, system quality and Quality of life.

CHECK YOUR PROGRESS

Choose the Correct Answer:

1. _________ occurs when the attacked system is overwhelmed by
large amounts of traffic that the server is unable to handle.
a) Crash attack b) Flooding Attack
c) Spoofing d) GPS Spoofing
2. __________happens when scammers set up a fraudulent website
to obtain information from victims or to install malware on their
computers.
a) Neighbor spoofing b)URL spoofing
c) GPS Spoofing d)Crash attack
3. _________ occur less often, when cybercriminals transmit bugs that
exploit flaws in the targeted system.

a) Flooding Attack b) Crash attacks

c) Spoofing d) Profiling
4.__________ attempts to trick a GPS receiver into believing it is in a
different location or headed in a different direction, by broadcasting
bogus GPS signals or other means.
a) Crash attack b) Flooding Attack
c) Spoofing d) GPS Spoofing

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5. The spoofer sends out emails with a falsified “From:”___________

a) Flooding Attack b) Crash attacks

c) Spoofing d) e- mail spoofing

GLOSSARY

Spoofing : Spoofing is a specific type of cyber-

attack in which someone attempts
to use a computer, device, or
network to trick other computer
networks by masqueradingasa
legitimate entity.

Flooding attacks : Flood attacks are also known as

Denial of Service (DoS) attacks. In
a flood attack, attackers send a
very high volume of traffic to a
system so that it cannot examine
and allow permitted network traffic.

Online Operations: : Online means that a computer,

device, or a person is connected to
a network, and usually
this means the Internet. While off-
line means the computer, device,
or person is not connected to a
network, cannot be reached, and
cannot communicate with any other
computer or device.

Control : Control is power to direct, or an

accepted comparison model in an
experiment, or a device used for
regulation. Control is defined as to
command, restrain, or manage.

GPS Spoofing : GPS spoofing is an attack in which

a radio transmitter located near the
target is used to interfere with a
legitimate GPS signals. The
attacker can transmit no data at all
or could transmit inaccurate

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 coordinates.

Neighbor spoofing : Neighbor spoofing is when you get

a call from an unknown number
that looks a lot like the numbers
where you live. The incoming call
will have the same area code and
maybe the same prefix (the three
numbers after the area code) as
your number.

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1)b 2) b 3) b 4)d 5) d

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Unit 16

SOCIETAL CHALLENGES OF
INFORMATION SYSTEM
STRUCTURE

Overview

Learning Objectives

16.1 Ethics for IS Professional

16.2 Societal Challenges of Information System

16.3 Ethical Analysis

Let us sum up

Check Your Progress

Glossary

Suggested Readings
Answers to check your progress

OVERVIEW
Information system has posed new challenges for the protection of
individual and society. Information sent over this vast network of
networks may pass through many different computer systems before it
reaches its final destination. Each of these systems is capable of
monitoring, capturing, and storing communications that pass through it.
LEARNING OBJECTIVES

After reading this unit, you should be able to

• discuss the ethics for IS Professional
• explain the model for ethical, social and political issues

16.1 ETHICS FOR INFORMATION SYSTEM PROFESSIONAL

The field of ethics (or moral philosophy) involves systematizing,
defending, and recommending concepts of right and wrong behavior.
Philosophers today usually divide ethical theories into three general
subject areas: meta ethics, normative ethics, and applied ethics. Meta
ethics investigates where our ethical principles come from, and what
they mean. Normative ethics takes on a more practical task, which is to
arrive at moral standards that regulate right and wrong conduct.

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This may involve articulating the good habits that we should acquire, the
duties that we should follow, or the consequences of our behavior on
others. Finally, applied ethics involves examining specific controversial
issues, such as abortion, infanticide, animal rights, environmental
concerns, homosexuality, capital punishment, or nuclear war.
There are ethical, social, and political levels of analysis for each of the
five moral dimensions of information systems.
Privacy is the claim of individuals to be left alone, free from surveillance
or interference from other individuals or organizations, including the
state. Information technology and systems threaten individual claims to
privacy by making the invasion of privacy cheap, profitable, and
effective.
The claim to privacy is protected in the U.S., Canadian, and German
constitutions in a variety of different ways, and in other countries through
various statutes.
The Privacy Act of 1974 regulates the federal governments' collection
use, and disclosure of information. Most American and European privacy
law is based on the principles of Fair Information Practices (FIP) set
forth in 1973 to govern the collection and use of information about
individuals. This report states that an individual has an interest in the
information gathered about his or her and the record may not be used to
support other activities without the individual's consent.
The Gramm-Leach-Bliley Act of 1999 requires financial institutions to
disclose their policies for protecting the privacy of nonpublic personal
information and to allow customers to opt out of information-sharing
arrangements with nonaffiliated third parties.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA),
gives patients access to their personal medical records maintained by
healthcare providers and the right to authorize how protected information
about themselves can be used or disclosed, and limits the disclosure of
personal information about patients to the minimum amount necessary
to achieve a given purpose.
European privacy protection is much more stringent than in the United
States. The European Directive on Data Protection requires companies
to inform people when they collect information about them and to
disclose how it will be stored and used. Customers must provide their
informed consent (consent given with knowledge of all the facts needed
to make a rational decision) before any company can legally use data
about them.
EU member nations cannot transfer personal data to countries that don't
have similar privacy protection regulations. To work with Europeans

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privacy laws, the U.S. Department of Commerce developed a safe
harbor framework for U.S. firms. A safe harbor is a private, self -
regulating policy and enforcement mechanism that meets the objectives
of government regulators and legislation but does not involve
government regulation or enforcement. U.S. firms must be certified by
public accounting firms to be "safe harbor" for personal data on
Europeans, and this certification is recognized (but not enforced) by the
Department of Commerce.
Ethical Analysis- Professional code of conduct
The Internet poses new challenges to the protection of individual privacy
because information can easily be monitored, captured, and stored as it
passes through its network of computer systems. Companies can record
a user's on-line activities, such as what files were accessed, or which
Web sites were visited. Web sites can learn the identity of their visitors if
the visitors voluntarily register at the site or they can capture information
about visitors without their knowledge using "cookie" technology.
Cookies are tiny files deposited on a computer hard drive when a user
visits certain Web sites that track visits to the Web site. Some
companies use Web bugs, which are tiny graphic files embedded into e -
mail messages and Web pages to monitor who is reading the e-mail
message or Web page.

How Cookies Identify Web Visitors

Figure 16.1: How Cookies Identify Web Visitors

➢ P3P enables Web sites to translate their privacy policies into a
standard format that can be read by the user’s Web browser software.
The user’s Web browser software evaluates the Web site’s privacy
policy to determine whether it is compatible with the user’s privacy
preferences.

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Most Internet businesses do little to protect their customers' privacy
other than the publication of privacy statements. Some e-commerce
sites add opt-out selection boxes to their privacy statement, which, when
accepted by a visitor, permit the collection of personal information.
Privacy advocates promote the wider use of an opt-in model of informed
consent in which businesses are prohibited from collecting information
unless specifically allowed by the consumer. Spyware is small
applications that can secretly install itself on an Internet user's computer
by piggybacking on larger applications. Once installed, the spyware calls
out to Web sites to send banner ads and other unsolicited material to the
user, and it can also report the user's movements on the Internet to
other computers.
In addition to legislation, new technologies are available to protect user
privacy during interactions with Web sites, including encrypting email,
anonymizing Web surfing, preventing cookies, and eliminating spyware.
The Platform for Privacy Preferences (P3P) is a standard for
communicating a Web site's privacy policy to Internet users to help them
select the level of privacy they wish to maintain when interacting with the
Web site.

Figure 16. 2: The P3P Standard

➢ P3P enables Web sites to translate their privacy policies into a
standard format that can be read by the user’s Web browser software.
The user’s Web browser software evaluates the Web site’s privacy
policy to determine whether it is compatible with the user’s privacy
preferences.

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Meanwhile the elements that describe ethical behavior in the profession,
in general these codes assert that IT professionals need to commit to:
➢ Integrity
➢ Competence
➢ Professional responsibilities
➢ Work responsibilities
➢ Societal responsibilities
Specific guidance stems from these general principles. Some common
commitments between the three codes are to:

Maintain technical competence

Avoid injury to others

Avoid injury to their property,

Avoid injury to their reputation,

Avoid injury to their employment

Reject bribes, kickbacks, etc.

16.2 SOCIETAL CHALLENGES OF INFORMATION SYSTEM

Model for Ethical, Social and Political Issues

Ethical, social, and political issues are closely linked. The ethical
dilemma you may face as a manager of information systems typically is
reflected in social and political debate. One way to think about these
relationships is given in the below figure. Imagine society as a calm
pond on a summer day, a delicate ecosystem in partial equilibrium with
individuals and with social and political institutions. Individuals know how
to act in this pond because social institutions (family, education,
organizations) have developed well-honed rules of behavior, and these
are supported by laws developed in the political sector that prescribe
behavior and promise sanctions for violations. Now toss a rock into the
center of the pond. What happens? Ripples, of course.
There are five main moral dimensions that tie together ethical, social,
and political issues in an information society. These moral dimensions
are:
• Information rights and obligations
• Property rights and obligations
• Accountability and control
• System quality
• Quality of life

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Figure 16. 3 The relationship between ethical, social, and political Issues
in an information society.
The introduction of new information technology has a ripple effect,
raising new ethical, social, and political issues that must be dealt with on
the individual, social, and political levels. These issues have five moral
dimensions: information rights and obligations, property rights and
obligations, system quality, quality of life, and accountability and control.
There are five main moral dimensions for these issues that tie together
ethical, social, and political issues in an information society. These moral
dimensions are:
1. Information rights and obligations. What information rights do
individuals and organizations possess with respect to themselves? What
can they protect?
2. Property rights and obligations. How will traditional intellectual
property rights be protected in a digital society in which tracing and
accounting for ownership is difficult and ignoring such property rights is
so easy?
3. Accountability and control. Who can and will be held accountable
and liable for the harm done to individual and collective information and
property rights?
4. System quality. What standards of data and system quality
should we demand to protect individual rights and the safety of society?
5. Quality of life. What values should be preserved in an
information- and knowledge-based society? Which institutions should we
protect from violation? Which cultural values and practices are
supported by the new information technology?

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Key Technology Trends That Raise Ethical Issues
• Doubling of computer power
• More organizations depend on computer systems for Critical
operations
• Rapidly declining data storage costs
• Organizations can easily maintain detailed databases on
individuals

Networking advances and the Internet

• Copying data from one location to another and accessing
personal data from remote locations are much easier

Advances in data analysis techniques

• Companies can analyze vast quantities of data gathered on

Individuals for:
Profiling
• Combining data from multiple sources to create dossiers of
detailed information on individuals
Non obvious relationship awareness (NORA)
• Combining data from multiple sources to find obscure hidden
connections that might help identify criminals or terrorists

16.3 ETHICAL ANALYSIS

A Five-Step Process

1. Identify and clearly describe the facts.

2. Define the conflict or dilemma and identify the

Higher-order values involved.

3. Identify the stakeholders.

4. Identify the options that you can reasonably take.

5. Identify the potential consequences of your options.

LET US SUM UP
Information system has various societal and Ethical challenges. There
are two types of IS control Procedural Control and Facility control. There
are 5 moral dimensions on societal challenges on IS. They are
Information rights and obligations, Property rights and obligations,
Accountability and control, system quality and Quality of life.

191
CHECK YOUR PROGRESS

Choose the Correct Answer:

1. ___________ type of caller ID spoofing in which the call will appear
to be from someone you know or a person who lives near you.
a) Neighbor spoofing b) URL spoofing
c) GPS Spoofing d) System quality
2. The spoofer sends out emails with a falsified “From:” line to try to
trick victims into believing that the message is from a friend, their bank,
or some other legitimate source.
a) Neighbor spoofing b) e-mail spoofing
c) GPS Spoofing d) Profiling
3. ________ investigates where our ethical principles come from, and
what they mean

a) Applied ethics b) Normative ethics

c) Metaethics d) Facility control
4. Information systems support an organization's business operations,
managerial decision making and strategic competitive advantage. Such
system is called ___________

a) Business process reengineering b) Globalization

c) Roles of information systems d) Competitive advantage

5. Mistakes made in the system analyses stage show up in_______

a) System design b) System development

c) Implementation d) All the above

GLOSSARY

Accountability : Accountability is an essential part of

an information security plan. The phrase
means that every individual who works with
an information system should have specific
responsibilities for information assurance.

System development : Systems development is the process of

defining, designing, testing and implementing a
new software application or program.

Control : Control is power to direct, or an accepted

comparison model in an experiment, or a
device used for regulation. Control is defined

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 as to command, restrain, or manage.

Applied ethics : Information ethics has been defined as "the

branch of ethics that focuses on the
relationship between the creation,
organization, dissemination, and use
of information, and the ethical standards
and moral codes governing human conduct in
society".

Normative ethics : Normative ethics, that branch

of moral philosophy, or ethics, concerned with
criteria of what is morally right and wrong. It
includes the formulation of moral rules that
have direct implications for what human
actions, institutions, and ways of life should be
like.

Meta ethics : Meta ethics is the study of moral thought and

moral language.

SUGGESTED READINGS
1. Bentley Trevor J (1986) Management Information Systems &
data processing, 2nd edition, Holt, Rinehart and Winston
publications, University of California. ISBN 0039106888,
9780039106881.
2. Donald W. Kroeber (1986) Computer-Based Information
Systems: A Management Approach, Subsequent
edition, Macmillan Publications, University of Virginia. ISBN
0023668407, 9780023668401.
3. Gordon B.Davis (2013) Management Information Systems, 1 st
Edition, TMH Publications, India. ISBN 007066241X.
4. Joel E. Ross (1970) Management by Information System,
illustrated edition, Prentice-Hall publications, University of
Wisconsin,ISBN 0135486289, 9780135486283.
5. Kenneth C. Loudon & Jane P. Loudon (2014) Management
Information Systems, 13th Edition, Pearson Publications, USA.

ANSWERS TO CHECK YOUR PROGRESS

1)a 2) b 3) c 4)c 5)c

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