Roles of information systems in modern organizations

The INFORMATION SYSTEM plays a major role in the organization by satisfying the diverse needs through a variety of systems such as Query systems, Analysis systems, Modeling systems and Decision support systems.

It helps the Clerical personnel in transaction processing and answers their queries on data pertaining to transaction. It helps junior management by providing operational data for planning and control, and helps them in Decision-making. It helps the Middle management in short-term planning, target setting and controlling business functions. It helps Top management in goal setting, planning and evolving business plans and their implementation.

OPERATIONAL-LEVEL SYSTEMS

At the operational level are transactions processing systems through which products are designed, marketed, produced, and delivered. These systems accumulate information in databases that form the foundation for higher-level systems.

In today’s leading organizations, the information systems that support various functional units-marketing, finance, production, and human resources-are integrated into what is known as an enterprise resource planning (ERP) system. ERP systems support the entire sequence of activities, or value chain, through which a firm may add value to its goods and services. For example, an individual or other business may submit a custom order over the Web that automatically initiates “just-in-time” production to the customer’s exact specifications through an approach known as mass customization. This involves sending orders to the firm’s warehouses and suppliers to deliver materials just in time for a custom-production run. Finally, financial accounts are updated accordingly, and billing is initiated.

Along with helping to integrate a firm’s own value chain, transaction processing systems can also serve to integrate an organization’s overall supply chain. This includes all of the various firms involved in designing, marketing, producing, and delivering the goods and services-from raw materials to final delivery. Thus, inter organizational information systems are essential to supply-chain management. For example, purchasing an item at a Wal-Mart store generates more than a cash register receipt; it also automatically sends a restocking order to the appropriate supplier. Suppliers can also access a retailer’s inventory database over the Web to schedule efficient and timely deliveries.

Many transaction processing systems support electronic commerce over the Internet. Among these are systems for on-line shopping, banking, and securities trading. Other systems deliver information, educational services, and entertainment on demand. Yet other systems serve to support the search for products with desired attributes, price discovery (for example, via an auction), and delivery of products in an electronic form (software, music, movies, or greeting cards). A growing array of specialized services and information-based products are offered by various organizations on the Web, as an infrastructure for electronic commerce is emerging on a global scale.

KNOWLEDGE-LEVEL SYSTEMS

A large proportion of work in an information society involves manipulating abstract information and knowledge, rather than directly processing, manufacturing, or delivering tangible materials. Such work is called knowledge work. Three general categories of information systems support such knowledge work: professional support systems, office information systems, and knowledge management systems.

Professional Support System

Professional support systems offer the facilities needed to perform tasks specific to a given profession. For example, automotive engineers use computer-aided engineering (CAE) software together with “virtual reality” systems to design and test new models for fuel efficiency, handling, and passenger protection before producing prototypes, and later they use CAE in the design and analysis of physical tests. Biochemists use special three-dimensional modeling software to visualize the molecular structure and probable effect of new drugs before investing in lengthy clinical tests. Investment bankers often employ financial software to calculate the expected rewards and potential risks of various investment strategies. Indeed, specialized support systems are now available for most professions.

Office Information System

The main objectives of office information systems are to facilitate communication and collaboration between the members of an organization and to facilitate them between organizations. Placing an organization’s documents and messages in an electronic format-which can be classified, indexed, and stored for easy retrieval-enables individuals to access information on demand. One type of office information system, known as a workflow system, is used to route relevant documents automatically to all appropriate individuals for their contribution. Other types of office information systems handle digital messages in the form of electronic mail, facsimile, and voice mail.

Another category of office information systems allows different individuals to work simultaneously on a shared project by using networked computers. Known as groupware, such systems accomplish this by continually sending updated documents-such as business proposals, new designs, or progress reports-to each collaborator’s computer. These individuals and their computers need not be located in the same office or even the same building. Groupware is usually deployed over an intranet, a private network that is closed to the general public, and is often accessed by using software originally developed for the Internet.

Knowledge management systems

Knowledge management systems provide a means to assemble and act on the knowledge accumulated throughout an organization. Such knowledge may include the texts and images contained in patents, design methods, best practices, competitor intelligence, and similar sources. Organizational knowledge is often tacit, rather than explicit, so these systems must also direct users to members of the organization with special expertise. Access to an organization’s knowledge is often provided via an intranet equipped with specialized search software. The next section, Management support, describes how information systems are used to assemble reports and reach executive decisions.

MANAGEMENT-LEVEL SYSTEMS

Management reporting systems

A large category of information systems comprises those designed to support the management of an organization. Those systems rely on data obtained by transaction processing systems, as well as data acquired outside the organization (such as business intelligence gleaned on the Internet) and data provided by business partners, suppliers, and customers.

Information systems support all levels of management, from those in charge of short-term schedules and budgets for small work groups to those concerned with long-term plans and budgets for the entire organization. Management reporting systems provide routine, detailed, and voluminous information reports specific to each manager’s areas of responsibility. Generally, these reports focus on past and present performance, rather than projecting future performance. To prevent information overload, reports are automatically sent only under exceptional circumstances or at the specific request of a manager.

Decision support systems

All information systems support decision making, however indirectly, but decision support systems are expressly designed for this purpose. The two principal varieties of decision support systems are model-driven and data-driven.

In a model-driven decision support system, a preprogrammed model is applied to a limited data set, such as a sales database for the present quarter. During a typical session, an analyst or sales manager will conduct a dialog with this decision support system by specifying a number of “what-if” scenarios. For example, in order to establish a selling price for a new product, the sales manager may use a marketing decision support system. Such a system contains a preprogrammed model relating various factors-the price of the product, the cost of goods, and the promotion expense-to the projected sales volume over the first five years on the market. By supplying different product prices to the model, the manager can compare predicted results and select the most profitable selling price.

The primary objective of data-driven decision support systems is to analyze large pools of data, accumulated over long periods of time in “data warehouses,” in a process known as data mining. Data mining searches for significant patterns, such as sequences (buying a new house, followed by a new dinner table) and clusters (large families and van sales), with which decisions can be made. Data-driven decision support systems include a variety of statistical models and rely on various artificial intelligence techniques, such as expert systems, neural networks, and intelligent agents.

An important category of decision support systems enables a group of decision makers to work together without necessarily being in the same place at the same time. These group decision systems include software tools for brainstorming and reaching consensus. Another category, geographic information systems, can help analyze and display data by using digitized maps. By looking at a geographic distribution of mortgage loans, for example, one can easily establish a pattern of discrimination.

STRATEGIC-LEVEL SYSTEMS

Executive information systems make a variety of critical information readily available in a highly summarized and convenient form. Senior managers characteristically employ many informal sources of information, however, so that formal, computerized information systems are of limited assistance. Nevertheless, this assistance is important for the chief executive officer, senior and executive vice presidents, and the board of directors to monitor the performance of the company, assess the business environment, and develop strategic directions for the future. In particular, these executives need to compare their organization’s performance with that of its competitors and investigate general economic trends in regions or countries for potential expansion. Often relying on multiple media, executive information systems give their users an opportunity to “drill down” from summary data to increasingly detailed and focused information.

IMPLEMENTATION OF INFORMATION SYSTEMS

When an information system is executed internally by an organization, one of two methods is used: life-cycle development or rapid application development (RAD).

Large organizational systems, such as transaction processing systems and management reporting systems, are generally developed and maintained through a systematic process, known as a system life cycle that consists of six stages: feasibility study, system analysis, system design, programming and testing, installation, and operation and maintenance. The first five stages concern system development proper; the last stage involves long-term exploitation. Following a period of use (with maintenance as needed), as the figure shows, the information system may be either phased out or upgraded. In the case of a major upgrade, the system enters another development life cycle.

The principal objective of a feasibility study is to determine whether the system is desirable on the basis of long-term plans, strategic initiatives, and a cost-benefit analysis. System analysis provides a detailed answer to the question, what will the new system do? The next stage, system design, results in an extensive blueprint for how the new system will be organized. During the programming and testing stage, the individual software modules of the system are developed, tested, and integrated into a coherent operational system. Further levels of testing ensure continuing quality control. Installation includes final testing of the system in the work environment and conversion of organizational operations to the new system. The later stages of development include such implementation activities as training users and modifying the organizational processes in which the system will be used.

Life-cycle development is frequently faulted for its long development times and voluminous documentation requirements-and, in some instances, for its failure to fulfill the user’s requirements at the end of the long development road. Increasingly, life-cycle development has been replaced by a process known as rapid application development. With RAD a preliminary working version of an application, or prototype, is built quickly and inexpensively, albeit imperfectly. This prototype is turned over to the users, their reactions are collected, suggested modifications are incorporated, and successive prototype versions eventually evolve into the complete system. Sometimes RAD and life-cycle development are combined: a prototype is produced to determine user requirements during the initial system analysis stage, after which life-cycle development takes over.

After an installed system is handed over to its users and operations personnel, it will almost invariably be modified extensively over its useful life in a process known as system maintenance. For instance, if a large system takes 2 years to develop, it will typically be used and maintained for some 5 to 10 years or even longer. Most maintenance is to adjust the system to the organization’s changing needs and to new equipment and system software, but inevitably some maintenance involves correcting design errors and exterminating software “bugs” as they are discovered