Module-3: Information System

Hello Everyone! You must be aware that information is vital asset of any
organization. Business processes, functions and decision-making in an
organization is very much dependent on information. Organization
cannot exist without an information system. Information system is most
vital for organization’s business management and operations. Some
form of information system exist in any organization. It may be complete
manual information system or computerized. In this competitive business
world, the survival, growth and competitive advantage demand
appropriate information system. In this context, we must know about
information system. In this module we would cover the basic concept of
information system, it components and dimensions, computer based
information system, role of database and IT in information system,
conceptual framework, goals of information system and information
systems success. Also, we will discuss information system based on
organization functions, activities, and decision-making, along with key
challenges.

What is an Information System?

Information system (IS) is a system of interrelated components that

collect data or information as inputs from different sources, stores the
same, process or analyze the same to produce output (in various forms),
disseminate the output to various levels of management for various
tasks such as planning, operations, management, control and decision
making. Any deviation is given as feedback for control.

Information System is an open system. It interacts with outside entities

such as customers, government, competitors etc. It has a control and
feedback unit. This unit observes the output, compares the output with

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standard expected, finds the deviations if any and provides feedback to
minimize the deviations i.e. control. The system has a boundary and
consists of a number of smaller systems called subsystems each
complete itself and inter-related to others.

There is no common consensus in defining an information system.

Information system is integrated with organizational functions. It has

various subsystems that are developed and implemented as needed and
satisfies the information needs of various stakeholders of the
organization.

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Components of Information System

The components of an information system are

 Input
 Output
 Storage
 Processing or analysis
 Feedback and
 Control

Goals of Information Systems

 Increases Efficiency: IS increases operational efficiency and

functional efficiency in terms of time, cost and quality.
 Increases Quality of Services
 Developing New Products and Services
 Changing the way doing Business
 Increases Decision-making Capability
 Increases Competitive Advantage

Dimensions of Information System

Three dimensions of information system are
1. Organization
2. Management
3. ICT
Organization encompasses employees, structure, standard operating
procedures (SOPs), politics, culture and values. Information system is
designed and developed by people, used by people and implemented by

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people in an organization following SOPs of organization. Structure,
politics, culture and value system influence the implementation or use of
IS. Managers take the help of IS for their various tasks such as
monitoring, assessment, planning, control, allocate, decision-making,
delegating, inference, forecasting, organizing, staffing and directing etc.
While performing tasks, managers use ICT in different components of IS.
ICT is the hardware, software, telecommunications and peripherals
whereas, information system is viewed from system perspective in
organization context and encompasses employees, management
decision-making, and ICT/technology. Managers can use appropriate IT
in any one or more components of information system for making the
information systems more efficient and effective and to take advantage
of its power.

Historical Development of Information System

Information system is a broad concept. It is a multi-disciplinary field and

dominated by many theories, and perspectives. Prior to 1980,
importance of information and its value was not prominent. There was no
systematic knowledge of how data is converted to information and
information cycle (i.e. how information gets available in different
sources). At the same time, use of technology in the context of
information was not much. The management process was more or less a
personal art and face-to-face.

Afterwards, the information and its processing became very important for
the organization and evolved as an important societal activity. Due to
competition in markets, management environment is changed. Industrial
economics is changed to information and knowledge based economies.
Managers started using information in various tasks such as

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coordinating, decision-making, planning, and management control. At
the same time, besides the drivers, IT became one important enabler of
information, processing and its use. Role of IT in organization change
became significant.

Manual Information System

Manual Information system is a system for collecting, storing,

processing/ analyzing, disseminating and use of information without
application of any ICT. In the early days all the above activities were
done manually without using any computers or ICT. We call it manual
information system.

Computer-based Information System (CBIS)

CBIS is an information system where some or all of its subsystems use

Information Technology (IT) or Information and Communications
Technology (ICT). IT can be used in any stage such as gathering data,
storing, analyzing/ processing, dissemination, use and feedback/control.
In general, a CBIS consists of computer hardware, software, database, a
set of procedures, and IT personnel.

Database and Information System

Database and Database Management System (DBMS) has

strengthened the foundation of IS in the following way.

 DBMS can implement various information needs of IS.

 Input and output designs of IS are flexible.
 Improves the flexibility of the design.
 Querying and reporting becomes easy and quick.
 Provides end-user computing capability.
 Provides both centralized and decentralized operations
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Role of Information Technology in Information System

IT has changed the way business works. Not only it helps in managing
assets of organization, it has also a significant role in increasing sales
and employee productivity. IT provides competitive advantage to the
organization. It provides ample opportunities in creating new products
and services, new process, reducing cost of products and services and
reduces time to act.

IT also acts as an enabler or implementer of any process. Using IT, one

can change, modify and drop any process. The discovery of several
disruptive information technologies question traditional concepts as well
as the assumptions about how various activities should be performed.
The following disruptive technologies have impacted organizations in
many ways:

 Automatic Identification Systems (e.g. Barcoding, RFID)

 Networking
 Shared databases
 Communication
 ERP
 EDI
 Intranet
 Extranet
 Internet & VPN

There are several enabling roles of IT. Due to shared databases,

information can appear simultaneously in many places instead of

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appearing in only one place at one time. Expert systems helps any
generalist (not necessarily one expert) to do the work of an expert.
Organizations can simultaneously manage centralization and
decentralization with the help of telecommunication network. Any
person, not necessarily one manager, can be empowered to take
decisions with the help of decision support systems. Due to advent of
communication technologies and PDAs, field personnel need not return
to office in different location to hand over data to office, or process the
data. Instead they can submit the field data from the field itself using
PDAs and communication technologies. With the help of technologies
such as RFID, objects will tell you where they are instead of you find
where it is.

Besides the above, IT can automate various activities, manages huge

data volume, manages varieties of data types, process fast-incoming
data, reduces intermediaries in various transactions, standardize
processes, collects data from various sources, makes the processing
faster, tracks inputs and outputs, and change the sequence of tasks if
required. Using IT one can process and analyze complex data and
discover insights or knowledge. Due to the enabler and drivers of
information asset, organizations design and implement information
systems using IT in information systems. IT can change the form, use,
importance, users and utility of information use.

On the other hand, IS can exist without IT or minimal use of IT. In past
when there was no IT, many offices (e.g. Government) were using IS
without IT. Use of IT in information system is not a necessary condition.
At the same time, use of IT in IS does not guarantee that information
system is working well in the organization. IS depends on attitude and

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behaviour of employees for making its successful implementation and
adoption.

Conceptual Framework of Information Systems

There is no established standard conceptual framework for explaining
IS. One can describe one IS using a conceptual framework of various
approaches: by its operational components, supports in decision-
making, management activity (i.e. planning and control), organization
functions and its implementation.

IS based on Organizational Functions:

An organization can be described as a set of functions. Each category of

organization differs in their core functions. Organizations classify their
functions differently. The functions include sales, logistics, finance and
accounting, marketing, research and development, production, and
human resource. Each function has different information requirements
and hence require specific functional information system. In an
organization, management activities cut across all the functional
subsystems i.e. interrelated. Information system is designed to support
specific function subsystem or cross-functional subsystems.

IS based on Management Activities:

An organization can be viewed as a set of management activities. The

management activities include operational control, management control,
and strategic planning. IS supports various management activities at
different levels of management.

Information Systems for Operational Control:

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Operational control is the process where short-term operational activities
of the organization are carried out as expected/ pre-defined standard.
Operational control activity uses established procedures and rules.
Information systems designed for this activity provides processing
supports for transaction execution, report preparation and query
handling.

Information Systems for Management Control:

Management control is the management activity where managers

measure the performance, compares it to the standard set, find the
deviations and provide feedback so that actions can be taken to reduce
deviation (control activity). Information system is designed to support this
activity.

Information Systems for Strategic Planning:

Strategic planning is the management activity where managers develop

strategies for achieving its objective, survival and growth. Information
system is designed to support this activity.

Impact of IT on IS

 With proper access control and security measures, IS can be

easily accessed by users of the system for its different use.
 Specific information system can be made and available to users.
 Only relevant information can be displayed to users.
 All the resources of IS such as database and software can be
shared and used by many users simultaneously.
 Huge amount of data can be stored easily using database.
 Data can be processed easily and efficiently by using IT.

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  Easy to disseminate information with the help of Internet, Email,
intranet and networking infrastructure.
 IS can be protecting from intentional and unintentional damage.
 Wrong inputs or wrong programming to IS would lead to inaccurate
information.
 Fraudulent transactions can be done if proper system audit and
authentication of information system is not done

Information Systems Security

Information systems security refers to the tools, technology, methods,

principles, and processes to make the vital information of the
organization confidential, protected, integrity and available.
Confidentiality is maintained by restricting access only to authorized
users. Integrity refers information represents its intended meaning and
has not been altered. Information availability refers to access and
modification of information by only authorized person in an appropriate
time frame. IS security includes protection of data or information in all
forms that are in store, in transit.

In order to deal with IS security, different measures are taken by

organization such as firewalls, business continuity planning (BCP)
information systems privacy and security policy, disaster recovery
planning (DRP) intrusion detection system and physical security.

Value of information system

The business value of information system can be financial or non-
financial. The following ways are examples how business value can be
created or increased where information system plays an important role:
 Redesigning business processes
 Better decision-making process

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  Using different types of models
 Building and improving relationships with partners/ stakeholders
Examples of the intangible business value are
 Efficient customer service
 Better decision-making
 Comfort of availing services
 Faster response
 Efficient business operations

Measurement of business value is very complex and not easy. The

tangible business value is monetary and can be quantified. It can be
measured as productivity (sales or employee), organization performance
such as payback, reduction in cost, net present value, net revenue,
profit, return on investment, and internal rate of return etc. On the other
hand strategic business value will be affected negatively in case of the
following:
 Selection of an enterprise system that is not fitting to the
requirement
 Organization is not ready to have one enterprise system.
 Business value of information system is not evaluated
 Information system and IT used are not aligned to business
strategy
 Organization strategy is tightly coupled with IS/IT but efficacy of
operations is very poor.

Information System Success

Success of IS can be described by using Delone and McLean IS
Success model. According to this model, IS can be evaluated using six

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dimensions of success and relationships among these dimensions. The
dimensions are information quality, system quality, service quality,
intention to use, actual use, user satisfaction, and net benefits.

Information quality refers to the desirable or expected characteristics of

information system outputs. The characteristics can be accuracy,
completeness, relevancy, understandability, usability, preciseness, and
timely etc. System quality is the desirable characteristics of any
information system. Here, the characteristics include ease of use,
flexibility, response time, and reliability etc. Service quality refers to the
quality of support users of information system receive. Here, the quality
refers response time, accuracy, behavior, and technical knowledge etc.
Intention to use is the intention of users of information system to utilize
the capabilities of an information system. Use (actual use) is how the
users are actually utilizing the information system and it can be degree
of use, frequency of use, and whether voluntary or forced use etc. User
satisfaction is the level of satisfaction the user is getting out of using the
information system in any form. Net impacts refers to both positive and
negative contribution to the success of individuals, or organizations. Net
impacts of productivity, sales, cost reduction, profit, and revenue etc. are
some of the examples.

Referring to figure given below, information quality impacts both user

satisfaction and intention to use. Both intention to use and user
satisfaction impact net benefits. System quality indirectly impacts net
impacts through mediating variables intention to use and user
satisfaction. Service quality directly impacts intention to use and user
satisfaction that in turn, influence net impacts. Information quality,
system quality, and service quality impact use and intention to use.

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Actual use influence user satisfaction, which, in turn, influence intention
to use. User satisfaction, and actual use directly impacts net impacts.
User satisfaction directly influences net impacts. This is again directly
influenced by actual use. Net impacts are influenced by actual use and
by user satisfaction. Net impacts influence both user satisfaction and
intention to use and actual use.

Organization Factors that Impact Information Systems

 Data-driven decision making against judgement based decision
making
 Information strategy aligning organization strategy
 Culture of believing and using information system
 Integration of various business processes
 Process-based view rather than functional view
 Implementing and adopting more information systems when
existing information systems are established and accepted

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  Decision making style of managers
 Implementing appropriate change management in organization,
while implementing information system

Why Information Systems are not used in Organization?

Each and every organization uses information systems in some form e.g.
manual information system. Without any information system organization
cannot operate effectively and efficiently. The only difference is that
organization may not be using information system efficiently or not using
technology/ICT in information systems. Following are the reasons:

 Information system is not designed for users in the organisation

 Information system is not aligned to organization strategy and
mission
 Decision-making is not information driven but judgment oriented
 Value of information system is not known or cannot be measured
 Management does not believe power of information and ICT.
 Information system does not provide any competitive advantage

Key Challenges of Information System

 Aligning IS to organizations strategy. If not properly aligned,
organization may not get any advantage of IS and incur loss.
 Selecting appropriate IS for information requirements of
organization.
 Modifying organization processes according to information system
implemented.
 As IT has become a commodity, IS may lose its competitive
advantage as it can be copied and outdated.
 Evaluating value and impact of information system

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  Ethical use of Information System

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