Management Information System

Chapter objectives CHAPTER ONE INTRODUCTION TO MIS

After completing this chapter, students will be able to:
Explain the importance of MIS
Describe the evolution and characteristics of information age
Define IT and the career side of information technology

1. Introduction

All individuals, companies and, in general, all organizations are continuously capturing data,
many of which are of no significance to them at all. However, other data are available that would
afford them a better understanding of their own environment and of themselves. These data what
we know as information – enable them to make more accurate decisions? For this reason, the
right amount of information at the right time is a key factor for every organization.

Management information systems can be described as tools that help managers organize and
make decisions from their data. More simply, effective MIS aids communication.
Unsurprisingly, it‘s still true that people generally accomplish more together than they do apart,
and the old concept of collaboration and communication is still at the core of business.
Management information systems strive to efficiently collect, format, and communicate
information to awide variety of people. A number of software packages and applications
designed to help you collaborate more and communicate. First, it is important to have a solid
understanding of computing hardware, since these are the tools of processing and
communication used in management information systems.

Activity1
1. Whatisthe impactof management information system onbusiness?
2. DefineandDiscuses aboutthedifferencebetweenthe followingkeyterms
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a. Data [Link]
b. System [Link] [Link] information system
 1.1. Basic Definitions

Before going into any details, it is desirable to define some key terms so we can
communicateeffectively.
Data: Data is raw facts. Data is like raw material. Data does not interrelate andalso it does
nothelp in decision making. Data is defined as groups of non-random symbols in the form of
text, images, voice representing quantities, action and objects.

Information: Information is the product of data processing. Information is interrelated

[Link] is equivalent to finished goods produced after processing the raw material.
Theinformation has a value in decision [Link] brings clarity and creates an
intelligenthuman responsein the mind.

―Informationisadatathathasbeenprocessedintoaformthatismeaningfultorecipientandis
ofrealorperceivedvalueinthecurrentortheprospectiveactionordecisionofrecipient.‖Although the
terms data and information are sometimes used indiscriminately, they dohave different
meanings. Data are non-random symbols that represent the values of attributes orevents.

Hence, data are facts, events and transactions stored according to an agreed code. Data are
factsobtained through reading, observation, calculation, measurement, etc. The amounts and
other details on anorganization‘sinvoices, chequesor pay slips, etc, are referred to as data,

For example, Information is a set of data transformed in such a way that it helps to reduce future
uncertainty and, therefore, contributes to the decision-making [Link] is data
transformed in a way that makes sense to the person who receives it; in other words, it has a
realor perceived value for that person when he or she acts or takes decisions. Information,
moreover,is data that have beenfinished product interpreted and understood by the recipient of
themessage. The relationship between data and information is similar to that ofraw materials
[Link]
ngaspecific decision.

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A system is a set of interrelated components with a clearly defined boundary working together
toachieve a common set of objectives by accepting inputs and producing outputs in an organized
transformation [Link] refers to acombination of components working [Link] example, a
computer system includes both hardware and software. A Windows system is apersonal
computer running the Windows operating system. A desktop publishing system is
acomputerrunningdesktop publishingsoftware.

Componentsof asystem
 InputTheactivityof gatheringandcapturingdata Whatevergoesintothe computer
 ProcessingConvertingor transformingdatainto usefuloutputs
 Output Useful information, usually in the form of documents and/or reports
Anythingthat comesout of acomputer
System A system is defined as a set of elements which are joined together to achieve a
commonobjective. The elements are interrelated and interdependent Systems range from very
simple tovery complex. There are numerous types of systems. For example, there are biological
systems (the heart, etc.), mechanical systems (thermostat, etc.), human/mechanical systems
(riding abicycle, etc.), ecological systems (predator/prey, etc.), and social systems (groups,
supply anddemand, friendship, etc.).

Informtion systemAn information system is a set of people, procedures, and resources

thatcollects, transforms, and disseminatesinformation in anorganization.

An information system is a set of interrelated components that collect (retrieve), process, store,
and distribute information to support decision makingandcontrol inan organization
Today'sorganizations relyon manytypes of information [Link]:
 Simplemanual(Paper-and-pencil)informationsystems
 Informalinformationsystems(Word-of-mouth)
 Formal(writtenprocedures)informationsystems
 Computer-basedinformationsystemsthatusehardware, software, and people resources to
transform data resources into information productsforend users.

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An informationsystemis a typeof fabricated system that isused by one or more person’s tohelp
accomplish a task or assignment. Information systems come in all shapes and sizes and
arelimited onlybyhuman imagination

[Link]
eebasicactivitiesinput,processing,[Link]
outputreturnedtoappropriatepeopleoractivitiesintheorganization to evaluate and refine the input.
Environmental factors such as customers, suppliers, competitors, stockholders, and regulatory
agencies interact with the organization and its information systems.

1.1. DefinitionofManagementInformationSystem

MIS is prevalently demystified as the Information System, the Information and Decision System,
the Computer-basedInformation System.

TheMIShas morethanonedefinition, some of whichare givenbelow:

 MIS is the system, which makes available the right information to the right person, at
therightplace, at therighttime, in therightform andatthe rightcost.
 The MIS is defined as the system that provides information support for decision
makingintheorganization.
 The MIS is definedasan integrated system of man and machine for providing
theinformation to support the operations, the management and the decision making
functionintheorganization.
 The MIS is defining as the system based on the data base of the organization evolved
forthepurposeofprovidinginformation to the peoplein theorganization.
 TheMISisdefiningasa Computer-based InformationSystem.
MIS is an Information Management and Systems, is a discipline covering the application
ofpeople, technologies, and procedures collectively called information systems,to solving
business problems.
'MIS'isa plannedsystemof collecting, storing and disseminating data in the form of information
needed to carryout thefunctions of management.

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The MIS is defined as a system which provides information support for decision making in the
organization.

TheMISisdefinedasanintegratedsystemofmanandmachineforprovidingtheinformationtosupportthe
operations,themanagement andthedecisionmakingfunction intheorganization.

TheMISisdefinedasasystembasedonthedatabaseoftheorganizationevolvedforthepurposeof
providinginformation to the people in the organization.

TheMISisdefinedas a Computer -basedInformationSystem.

Inordertogetabettergripontheactivityofinformationprocessing,itisnecessarytohaveaformalsystem
which should takecareof the followingpoints:
 Handlingof avoluminous data.
 Confirmationof thevalidityofdataand transaction.
 Complex processingofdataandmultidimensionalanalysis.
 Quicksearchand retrieval.
 Massstorage.
 Communicationoftheinformationsystem totheuser ontime.
 Fulfillingthe changingneeds oftheinformation.
Themanagementinformationsystemusescomputersandcommunicationtechnologytodealwiththesep
oints of supreme importance.

1.2. Roleof managementinformationsystem

Activity

 Dearlearner!pleaseindicateanddiscusesabout
thesignificanceofmanagementinformationsystem

 Howtherole ofheartin humanbodyrelated withmanagement informationsystem? 

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The role of the MIS in an organization can be compared to the role of heart in the body.
Theinformation is the blood and MIS is the heart. In the body the heart plays the role of
supplyingpureblood to all the elements of thebodyincludingthe brain.

The heart works faster and supplies more blood when needed. It regulates and controls
theincoming impure blood, processes it and sends it to the destination in the quantity needed.
Itfulfills theneedsof blood supplyto human bodyin normal course and alsoin crisis.

The MIS plays exactly the same role in the organization. The system ensures that an
appropriatedataiscollectedfromthevarioussources,processed,andsentfurthertoalltheneedydestinati
ons. The system is expected to fulfill the information needs of an individual, a group
ofindividuals,themanagementfunctionaries: themanagers and thetop management.

TheMISsatisfiesthediverseneedsthroughavariety ofsystemssuchasQuery Systems,Analysis

Systems, Modeling Systems and Decision Support Systems the MIS helps in
StrategicPlanning,Management Control,Operational Controland TransactionProcessing.

The MIS helps the clerical personnel in the transaction processing and answers their queries
onthe data pertaining to the transaction, the status of a particular record and references on a
varietyof documents. The MIS helps the junior management personnel by providing the
operational datafor planning, scheduling and control, and helps them further in decision making
at the operationslevel to correct an out of control situation. The MIS helps the middle
management in short themplanning, target setting and controlling the business functions. It is
supported by the use of themanagement tools of planning and control. The MIS helps the top
management in goal setting,strategicplanningandevolvingthe business
plansandtheirimplementation.

The MIS plays the role of information generation, communication, problem identification
andhelps in the process of decision making. The MIS, therefore, plays a vita role in the
management,administrationand operations of an organization.

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 1.3. SubsystemsofMIS

Thetwo approachesto definesubsystems;

1. Organizationalfunctionsubsystems:
a) Marketing information system- sales forecasting, sales planning, and sales analysis.
Thecomputerbasedinformation systemssupportthe marketingfunctioninthe followingareas:
 Sales management:- plan and monitor sales performance of products and sales
peopleandproducessalesanalysis,reportswhichanalyzesalesbyproduct,productline,custome
r,sales person, and sales territory.

 Productmanagement:-[Link] can
help provide price, revenue, cost, and growth information for existingproductsand new
product development.

 Advertising and promotion:-information helps managers achieve sales objectives at

thelowestpossiblecosts foradvertisingand promotion.

 Salesforecasting:-marketingmanagersusemarketresearchdata,historicaldata,promotion
plans, and statistical forecasting models to generate short-range and long-rangesales
forecasts.

2. Market research:-Computers and statistical analysis software help the market

researchactivity collect, analyze, and maintain information on a wide variety of market
variablessubjectto continual change.

b) Manufacturinginformationsystem-productionplanningandschedulingcostcontrolanalysis.
3. Computer Integrated Manufacturing (CIM):- is an overall concept which stresses that
thegoals of computer use in factory automation must be to SimplifyProduction
processes,productdesign,factoryorganization,Automateproductionprocesses,andbusinessfun
ctions that support them with computers androbots, Integrateall production,
andsupportprocesses usingcomputers and Tele networks

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Examples

- Engineersdesignbetterproductsusingboth
 CAE
 CAD
- betterproductionprocesseswith
 CAPP -computer-aidedprocessingplanning
- Computersarealsousedtohelp
1) planthetypesofmaterialneededintheproductionprocess- calledMRP
2) tointegrateMRPwithproductionschedulingandshopfloorcontrolknownasMRPII.
(Manufacturing resourceplanning)
- computer-aidedmanufacturing(CAM)
 usedtohelpmanufactureproducts
 thiscan beaccomplishedby
 Monitoringandcontrollingtheproductionprocessinafactory-ShopFloor
control
 Directlycontrollingaphysicalprocess- Processcontrol
 Directlycontrollingamachine tool-Machinecontrol
 Directlycontrollingamachinewithsomehumanlikecapabilities-
Robotics.
c) Personnel information system- salary administration, planning HR
recruitment,performance analysis.
- SomeofthemajorapplicationsofinformationsystemsthatsupportHRMare:
Staffing
 Personnel record-keeping system:-keeps track of additions, deletions, and other changes
tothe records in a personnel database, Changes in job assignments and compensation, or
hiringandterminations are examples.

 Employee skills inventory system:-uses the employee skills data from a personnel
databaseto locate employees within a company who have the skills required for specific
assignmentsandprojects.

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 Personnel requirements forecasting:-to assure a business an adequate supply of high-
qualityhumanresources.

 Training and Development:-computer-based training programs and appraisals of

employeejobperformanceare availableto help this areaofHRM.
 Compensation analysis:-Information systems can help analyze the range and distribution
ofemployeecompensation;wagesandsalaries,incentivepaymentsandfringebenefitswithinacom
pany, and makecomparison with compensation paid bysimilarfirms.

d) Accountinginformationsystem-financialanalysis,costanalysis,capitalplanning,etc.
 Operationalaccountingsystems:-computer-
basedinformationsystemsrecordandreporttheflowoffundsthroughanorganizationonahistori
calbasisandproduceimportantfinancial statements such as
balancesheets,incomestatements.
 Managementaccountingsystems:-suchsystemsalsoproduceforecastsoffutureconditions
such as projected financial statements, and financial budgets. It emphasized oncost
accounting reports, the development of financial budgets and projected
financialstatementsandanalyticalreportscomparingactualtoforecasted performance.
e) Logisticsinformation system-planningandcontrolofpurchasing,inventories,distribution.
f) FinancialInformationsystems:-computerbasedfinancialinformationsystemssupportmanagers
in decisions concerning the financing of a business, and the allocation and controlof financial
resourceswithin a business. Major financial informationcategories include:collect information
on all cash receipts and disbursementson a real time or periodic basisalso produce daily,
weekly or monthly forecasts of cash receipts or disbursements, which areused to spot future
cash deficits orsurpluses. Such information allows businesses to depositor invest excess
funds more quickly, and thus increase income generated by deposited orinvestedfunds.
 CapitalBudgeting:-involvesevaluatingtheprofitabilityandfinancialimpactofproposed
capital expenditures; long-term expenditure proposals for plant and equipmentcan be
analyzed using a variety of techniques: present value analysis of expected
cashflows,probabilityanalysis of risk

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  Financial Forecasting:- A variety of statistical forecasting packages provide
techniquesthat result in financial forecasts of national and local economic conditions,
wage levels,pricelevels,and interestrates
 Financial Planning:-Financial planning systems use planning models to evaluate
thepresent and projected financial performance of a business. It also helps determine
thefinancingneeds of business andanalyzealternativemethods offinancing.
g) Topmanagementsystem-strategicplanning, resourceallocation.
2. Activitiessubsystems:
a) Transactionprocessingsystem-processingoforders,shipments,[Link]
processing systems are information systems that process data resulting fromthe
occurrence of business transactions. A transaction is a record of an event, which
thebusiness must respond. For example, data about an order that has just been
[Link] tothis transaction by:
 fillingthe order
 adjustingits inventorytoaccount for theitems used tofill theorder
 generatingapackingslip
 packagingand shippingtheorder
 billingthecustomer
Thetransactionthustriggersawholeseriesofeventsthateventuallyupdatethefirm'sbusinessrecordsand
produceappropriate documents.
Thus,transactionprocessingactivitiesareneededtocaptureandprocesssuchdataortheoperationsof
abusinesswould grind to a halt.

b) Operationalcontrolsystem-schedulingofactivitiesandperformancereports.
c) Managementcontrolsystem-formulationofbudgetsandresourceallocation.
d) Strategicplanningsystem-formulationofobjectivesandstrategicplans.

1.5. ContemporaryApproachestoInformationSystems
Multiple perspectives on information systems show that the study of information systems is
amultidisciplinary field. No single theory or perspective dominates. Figure1.1 illustrates
themajor disciplines that contribute problems, issues, and solutions in the study of
[Link],thefieldcanbedividedintotechnicalandbehavioralapproaches.

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[Link],devices, and
―hard‖physical technology, they require substantial social, organizational, and
intellectualinvestments to makethem work properly.

Figure1.1:Contemporaryapproachestoinformationsystems

The study of information systems deals with issues and insights contributed from technical
andbehavioraldisciplines.

a) TechnicalApproach
The technical approachto information systems emphasizes mathematically based models tostudy
information systems, as well as the physical technology and formal capabilities of
[Link],manageme
ntscience,and operations research.

Computerscienceisconcernedwithestablishingtheoriesofcomputability,methodsofcomputation,
and methods of efficient data storage and access. Management science
emphasizesthedevelopment of models fordecision-makingand management practices.

Operations research focuses on mathematical techniques for optimizing selected parameters

oforganizations,suchas transportation, inventorycontrol, and transactioncosts.

b) BehavioralApproach
An important part of the information systems field is concerned with behavioral issues that
arisein the development and long-term maintenance of information systems. Issues such as
strategicbusinessintegration,design,implementation,utilization,andmanagementcannotbeexplored

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usefully with the models used in the technical approach. Other behavioral disciplines
contributeimportantconcepts andmethods.

Forinstance,sociologistsstudyinformationsystemswithaneyetowardhowgroupsandorganizations
shape the development of systems and also how systems affect individuals,
groups,[Link]
informationsystemswithaninterestinhowhumandecisionmakersperceiveanduseformalinformation.
Economistsstudyinformationsystemswith an interest in what impact systems have on control and
cost structures within the firm andwithinmarkets.

The behavioral approach does not ignore technology. Indeed, information systems technology
isoften the stimulus for a behavioral problem or issue. But the focus of this approach is
generallynot on technical solutions. Instead, it concentrates on changes in attitudes, management
andorganizationalpolicy, and behavior.

ManagementInformationSystems
• Useofcomputer-basedinformationsystems inbusinessfirms
• CombinesworkofCS,management,andoperatingresearchtowarddevelopingsystemsolutio
nsto real word problems
• Concernedwithbehavioralissuesofdevelopment, useandimpactof IS
Main actors: Suppliers of hardware and software, Business firms, Managers and
employees,Firm‘senvironment (legal, social, cultural context).

After contrasting the technical and behavioral approaches, you should stress to your students
thatthe socio-technical approach does not ignore the technical, but considers it as a part of
theorganization. This is also a good place to reinforce the differences between information
systemsliteracyandcomputer literacy.

(1) ABusinessPerspectiveonInformationSystems

MajorBusinessFunctions:
 Salesandmarketing
 Manufacturing
 Finance

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  Accounting
 Humanresources
(2) Management Levels
Seniormanagers:make long-rangestrategicdecisionsaboutproductsand
servicesMiddle managers: carry out the programs and plans of senior
managementOperationalmanagers:monitor thefirm‘s dailyactivities

Figure1.2:ManagementHierarchies

The first level strategic planning processes determines what markets or businesses the
companyshould be in at present or plant to be in the near future. The next level, management
controlincludes processes or functions that facilitate the management of those processes
delegated to theoperational control level. The bottom level, operational control indicates
processes performed tocontrol the basic product or services produced by the company. It is
concerned with individualtasks or transactions, such as procurement or raw material as per
prescribed quantity and quality,sellingof products to specific customers.

(3) Contemporaryapproachestoinformationsystems
a) TechnicalApproach
b) BehavioralApproach
(4) Socio-

technicalSystemsManagementInformatio

nSystems(MIS)

Systemperformanceoptimizedwhentechnologyandorganizationadjusttoeachotherfor
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asatisfactoryfit.

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 1.6. TheEvolutionandcharacteristicsoftheInformationAge
1.6.1. TheEvolution oftheInformationAge
AgriculturalAge:Theperioduptothe1800s,whenthemajorityofworkerswerefarmerswhoselives
revolvedaround agriculture.

IndustrialAge:Theperiodfromthe1800sto1957,whenworkprocessesweresimplifiedthroughmecha
nization and automation.

InformationAge:Theperiodthatbeganin1957,inwhichthemajorityofworkersareinvolvedinthecreat
ion, distribution, and application ofinformation.

–
KnowledgeWorkers:Workersinvolvedinthecreation,distribution,andapplicationofi
nformation.

1.6.2. TheCharacteristicsoftheInformationAge
 Aninformation-basedsocietyhasarisen.
-InformationSociety:Asocietyinwhichmorepeopleworkathandlinginformationthan
at agricultureandmanufacturing combined.
 Businessesdependoninformationtechnologytogettheirworkdone.
 Workprocessesarebeingtransformedtoincrease productivity.

– WorkProcesses:Thecombinationof
activitiesthatworkersperform,thewaytheyperformthoseactivities, and the tools
theyuse.

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 – Productivity:The relationship between theresults of anactivity (output)and
theresourcesused to create thoseresults (inputs).

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 – Effectiveness: Theextenttowhichdesirableresultsareachieved.

 Information technology provides the means to rethink/recreate/reengineer

conventionalbusinessprocesses.

– Reengineering:Thereshapingofbusinessprocessestoremovebarriersthatprohibit an
organization from providing better products and services and to
helptheorganization capitalizeon its strengths.

– Business Processes: Collections of activities, often spanning several

departmentsthat take one or more kinds of input and create a result that is of value
to acompany‘scustomers.

• Success in business is largely determined by the effectiveness with which

informationtechnologyisused.

• Informationtechnologyis embedded inmanyproducts and services.

• Reengineeringeffortstoattaingreaterproductivity:
 IndustrialAge-DivisionofLabor:Separationofworkprocessintocomponenttask,with
different workers specializingin each of thetasks.
 InformationAge–Teamwork, Interconnection,andShared Information.

1.7. WhatisInformationTechnology?
Definition:
• Information technology (IT) is a technology which uses computers to gather,
process,store, protect, and transfer information. Today, it is common to use the term
Informationand communications technology (ICT) because it is unimaginable to work on
a computerwhichis not connected tothe network.
• Information technology is a systemic study of artifacts that can be used to give form
tofacts in order to provide meaning for decision making, and artifacts that can be used
fororganization,processing,communicationand applicationofinformation.

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 • A term used to refer to a wide variety of items and abilities used in the creation,
storage,[Link],commu
nicationsnetworks, andknow-how.
• Data:Rawfacts,figures,anddetails.
• Information:Anorganized,meaningful,andusefulinterpretationofdata.

• Knowledge:Anawarenessandunderstandingofasetofinformation
andhowthatinformationcan beput tothe best use.

CharacteristicsofInformationTechnology
InformationTechnologyhasthefollowingCharacteristics:

 Acquisition,Storage,manipulation,management,transmissionorreceptionofdataorin
formation.
 Realtimeaccess toinformation.
 Easyavailabilityof updated data
 ConnectingGeographicallydispersedregions
 Widerrangeof communicationmedia.

Summary
The management information system uses computers and communication technology to
dealwith;handlingofavoluminousdata,confirmationofthevalidityofdataandtransaction,complex
processing of data and multidimensional analysis, quick search and retrieval, massstorage,
communication of the information system to the user on time, fulfilling the changingneedsof
theinformation.

Managementinformationsystemsstrivetoefficientlycollect,format,andcommunicateinformationtoa
widevariety [Link]
helpyoucollaboratemoreandcommunicate.

The study of information systems deals with issues and insights contributed from technical
[Link]
based models to study information systems, as well as the physical
technologyandformalcapabilitiesofthesesystemsandbehavioralissuesthatariseinthedevelopmentan
d
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long-term maintenance of information systems. Issues such as strategic business
integration,design,implementation,utilization,andmanagementcannotbeexploredusefullywiththem
odelsused in the technical approach.

Management information systems; use of computer-based information systems in business

firms,combines work of CS, management, and operating research toward developing system
solutionsto real word problems and Concerned with behavioral issues of development, use and
impact ofIS.

SelfTestQuestions
MultipleChoices
1. Acomputerbasedfinancialinformationsystemssupportmanagersindecisionsconcerningthefinancingofab
usiness,andthe allocationandcontrol offinancialresourceswithinabusiness.
A. Managementinformationsystem
B. Marketinginformationsystem
C. Financialinformationsystem
D. Logisticinformationsystem
2. Anintegratedcomputerbaseduser-
machinesystemthatprovidesinformationforsupportingoperationsanddecision makingfunctions.
A. Managementinformationsystem
B. Decisionsupport system
C. Expert system
D. None
3. Whichisnot atypical businessfunction?
A. Sales
B. Service
C. Manufacturing
D. Benefits andcompensation
4. isanawarenessandunderstandingofasetofinformationandhowthatinformationcan be puttothe bestuse.
A. Data
B. Knowledge
C. Information

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 D. All of the above
5. Collectionsofactivities,oftenspanningseveraldepartmentsthattakeoneormorekindsofinputandcreateare
sultthatis ofvalue to acompany’scustomers.
A. BusinessProcesses
B. Reengineering
C. Information
D. Knowledge

SayTrue/False
1. Management information systems strive to efficiently collect, format, and communicate information to
awidevarietyofpeople.
2. WorkProcessesaretherelationshipbetweentheresultsofanactivity(output)andtheresourcesusedtocreate
thoseresults (inputs).
3. ITreferstoawidevarietyofitemsandabilitiesusedinthecreation,storage,anddispersalofdataandinformation.
4. Knowledgereferstoanorganized,meaningful,anduseful interpretationofdata.
5. Productivity is the combination of activities that workers perform, the way they perform those
activities,andthe toolsthey use.

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 CHAPTER
TWO:FOUNDATIONALCONCEPTSINMIS
Objectivesofthechapter
Aftercompletingthis chapter,studentswillbeableto:
 Definethe concept ofdata, information,knowledgeandwisdom.
 Describetheinformationneedandsources ofmanpower
 Understandframeworkforinformationsystems
 Explainthebusinesssystem

2. Introduction
Translating the real concept of the MIS intoreality is technically, an infeasible propositionunless
computers are used. The MIS relies heavily on the hardware and software capacity of
thecomputerand its abilityto process, retrieve communicatewith no serious limitations.
The variety of the hardware having distinct capabilities makes it possible to design the MIS for
[Link],iftheorganizationneedsalargedatabaseandverylittleprocessing, a
computer system is available for such a requirement. Suppose the organization hasmultiple
business location at long distances and if the need is to bring the data at one place,process, and
then send the information to various location, it is possible to have a
[Link],thenthecompute
r system can be hooked through a satellite communication system. The ability of thehardware to
store data and process it at a very fast rate helps to deal with the data volumes, itsstorage
andaccess [Link] ability of thecomputer to sort and merge helps to organizethe data in a
particular manner and process it for complex lengthy computations. Since thecomputer is capable
of digital, graphic, word image, voice and text processing, it is exploited togenerate information
and present it in the form which is easy to understand for the informationuser.
The software is available to transfer the data from one computer system to another. Hence,
youcan compute the results at one place and transfer them to a computer located at another place
[Link]
bleMIS.

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The advancement in computers and the communication technology has the distance,
speed,volumeand complexcomputingan easytask. Hence, designingthe
MIS for a specific need and simultaneously designing a flexible and open system
becomespossible, thereby saving a lot of drudgery of development and maintenance and
maintenance ofthe system. The concept of user friendly systems and the end user computing is
possible, makinginformationprocessingapersonalized function.
However,theapplicationofthemanagementprinciplesandpracticesintoday‘scomplexbusinessworld
is possibleonlywhen the MIS isbasedon computer systemsupport.

2.1. BusinessandManagementFunctions
2.1.1. Businessfunctions

A. FacilitiesandSecurity
Activities

1. IfYourCompanyspanseveralcontinentswhattypesofprocessesperformedbyfacilitiesan
dsecuritymanagement with regardto yourbusinessoperations.

2. Ifabusinessdisruptionweretooccur,whatprocessesandprocedureswouldbeneededinor
derto getyourbusinessback upand running?

For example, if the building is damaged or destroyed, physical security of the building will
bedisrupted. Employees won't be able to just swipe their badge at the front door. Is this a
criticalbusiness function or not? It depends. If the building is destroyed, it doesn't matter that
they can'tget into the building. You don't just need an alternate process, you need an alternate
[Link] isestablished,you need facilitiessupport.

thecriticalbusinessfunction,inthisexample,ishavingaplaceofbusiness("facilities").Security and
access are secondary. Notice how it helped to think of a specific scenario -- itfocused our
thinking so we could see the key areas. Is having a place of business a criticalbusiness function?
Not in the formal definition of a business process, but it's certainly [Link] usually
involves a process-- adding employees toaccess lists, providing
employeeswithbadges,IDs,orotheridentification,andgrantingthemappropriateaccesstocompany

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resources. This might be highly important during normal business functioning, but does it
impactthe company's mission-critical operations? It depends on your business. If you work in a
secureresearch environment, facilities and security may be mission-critical. If you work in a
softwaredevelopment firm where employees could check code out of an online library and work
fromhome, facilities and security may not be mission-critical at all. Facilities and security,
though,may have some critical business functions beyond these macro-level functions just
[Link] example, is facilities involved with the receiving or shipping of products,
inventory, or othertangible goods?If so, thesemaybecritical business functionsto beincluded.

B. Finance

By definition, the financial workings of the company are critical business functions, but not
allfinancial functions are mission-critical functions. For example, tracking receivables and
payablesare critical business functions because without the ability to keep track of what others
owe youandwhatyouoweothers,you haveno ideaaboutthefinancial statusof the company.

Employee payroll is another critical business function (which is a financial transaction that
mightfall under the purview of the Human Resources department). If employees are not paid,
ifappropriate withholding and other taxes and deductions are nottaken,your company
facesseriousproblems, with employeesand with stateandfederal authorities.

If your company has legal obligations to pay back a loan from a bank or make payments
orreportstoinvestors,[Link]
ecases,youmayhavesomeleewaywithregardtorepaymentifyouexperiencea natural disaster, but
don't count on it. Your financiers don't care, they just want payments ontime and in full.
Therefore, keeping track of these kinds of financial and legal obligations may
beconsideredcriticalbusinessfunctions,dependingonthenatureofyourcompanyanditsfinancingstruc
ture.

Accounting, finance, and reporting functions within finance should be reviewed and
[Link] are many interdependencies in financial functions that cross over into HR,
marketing,sales,IT,[Link] keyITsystemswere
togodown,whichbusinessprocesseswouldbe

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impacted? Which processes and functions would have to get back up and running first in order
tokeepsthebusinessgoing?

C. HumanResources

If your firm experiences some sort of natural disaster, your Human Resources staff will be
busytrying to fulfill a number of roles. Employees will usually contact HR for information on
thestatus of the building, the status of the company, whether they should report to work, where
theyshouldreporttowork,[Link]
thewell-beingof otheremployeesorinformationon the broader community.

Finally, employees will be looking to HR for information on how, when, and where they'll
getpaid. In fact, this will likely be the first question many employees ask, especially if the
businessdisruption happens just prior to or on payday. The staff in HR will be in the best position
toprovide guidance on the kinds of issues for which employees come to them. From there, you
cancompilealist of criticalbusiness functions.

Activities

Dearlearner!Remember,create alistofallbusinessfunctions, andthen prioritizethemlater.

1. IfITsystemsweretogodown,whichHRfunctionsandprocessesaremission-critical?

2. Howwould theybeaccomplished in theabsence ofIT systems?

3. Howwouldthisimpactotherareasofthecompany?

D. IT

Critical business functions for IT? It seems like almost all of them are critical most of the
time,especially if you judge by the phone calls, hallways pleas, and e-mails begging for
assistancewhenoneoftheapplications,servers,[Link],ultimately,the

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hardware and software should support the critical business functions, so the IT functions, in
largepart, will be driven by all the other departments. HR might say "we have to have our
payrollapplication";marketingmightsay"withoutourCRMsystem,wecan'tsellanyproducts";manufa
cturing might say "without our automated inventory management system, we can't evenbeginto
makeanything."

Therefore, the IT department's critical business functions are driven externally, to a large
[Link], there are also business functions that occur within the IT department critical to
thecompany's ability to recover and continue doing business after a disaster. For example, the
ITdepartment needs to create backups of all data that changes after a disaster. If a disaster
happensona Tuesday andyou're able togetsomesystemsbackupandrunning by the
followingMonday, backups need to start on Monday, as soon as data begins being generated,
saved, orchanged. Therefore, backup processes can be viewed as critical business functions from
the ITview.

E. Legal/Compliance
There are numerous mission-critical business functions related to legal and compliance areas
ofyour company. If your firm is subject to legal or regulatory statutes and requirements,
you'realready well aware of these constraints. You need to view these constraints and
requirements inlight of a potential business outage to determine which of these are mission-
critical, which arevitalor important, and which areminor in nature.

For example, if your firm deals with private or confidential personal data, it must be protected
atall times, even if you move to a manual system for the duration of a system outage.
Whichsystems, then, should be recovered first? Which business processes are mission-critical?
Thoserelated to remaining in compliance, both in terms of business process and business data,
shouldbe ranked very high on your list. The legal and financial consequences, as discussed in the
casestudyearlierinthisbook(seeCaseStudy1,"LegalObligationsRegardingDataSecurity")canbeenor
mous.

F. Manufacturing(Assembly)
Ifyourcompanyisinvolvedwiththemanufacturing,assembly,orproductionoftangibleproducts,youob
viouslyneedtoscour thisarea for mission-critical functionssinceyour abilityto

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produce your products is the engine that drives your company. There may be some systems
thatcan come online later, but there are likely to be certain systems that must be up and running
inorderfor anymanufacturing, assembly, or production to occur.
Identifythesebusinessprocessesandsystemsbyunderstandingwhatwouldhappeniftheproduction
equipment were to be damaged or destroyed. Next, understand what would happen ifthe
production equipment was left in tact but upstream or downstream events impacted
yourcustomers orvendors.
[Link]
should you put in place to deal with the potential loss of a key supplier? We'll look atrisk
mitigation strategies in detail in Chapter 5. For now, you should be identifying the
potentialimpact of various business disruptions to your manufacturing operations, keeping both
internalandexternal (upstream/downstream) disruptions in mind.
Activities

It's also important to understand the interaction between any manufacturing/assembly

automationequipmentandIT systems.
1. IfITsystems godown,howisautomationsystemsimpacted?
2. Ifautomationsystemsgo down,howis ITsystemsimpacted?
3. Whatmanualprocessescanbeimplementedintheabsenceofeitherautomationsystemsorassoci
atedIT systems?

G. MarketingandSales
Marketing activities help create demand for the company's products and services by
establishingor expanding knowledge of the company and its products/services. Sales activities
are thoseactionsthat actuallycreateasales transaction andbringrevenueinto the company.

Somecompaniesmaydeterminethatmarketingactivitiesintheaftermathofabusinessdisruptioncanbep
[Link] see marketing activities as
mission-critical in the aftermath of a business disruption becausethey are businesses that need to
stay in touch withcustomers, keep their products/services
infrontofcustomers,andcannotaffordtoletrumorsanderroneousinformationaboutthecompany'sstatu
s float around, especiallyin today's world of instant, on-demand news.

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 H. Operations

Ifyourcompanydoesn'tmanufacture,assemble,orproducetangibleproducts,itprobablydevelops and
sells intangible products such as service, software development, research, analysis,and others.
Whatever it is your company does, it sells something in order to generate [Link],
your operations are what end up generating those goods and services that are sold tocustomers.
As with manufacturing and assembly, operations are what generate sales and therefore are
almostalways part of the most urgent mission-critical business functions. Although "operations"
is arather broad and vague term, each company knows exactly what its operations are and how
theseoperations contribute to revenue generation. It is within that scope of knowledge that
theseactivitiesshould be assessed forcriticality.
I. ResearchandDevelopment
Some companies or organizations are funded through investors, through grants, or operate
asnonprofits. They may be dedicated solely to research and development and may not
generaterevenue in the traditional sense of the word. However, every organization needs funding
and thatfunding almost always comes with some sort of expectations and requirements about
what is tobeachieved with that funding.

Casestudy
For example, if your organization does biochemical research and you're funded by federal
orstate programs, you still have business functions related to deliverables to consider. Is the
nextround of funding predicated upon the successful delivery of the results of current
development ortesting? If so, you have several mission-critical systems to consider along with
assessing theimpact of a business disruption to your research. Do you have live cultures growing
in a lab thatneed to be tested and assessed? If so, what would happen if the research building was
destroyedby fire or by an earthquake or tornado? How would your research be impacted and how
wouldyou recover? Though these are a bit different from traditional business functions and are
notrelated directly to IT systems, these are questions that should be asked and answered if you're
inthis business.

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 J. Warehouse(Inventory,OrderFulfillment,Shipping,Receiving)
If your company deals in tangible goods of any kind, you have processes for handling
inventory,orderfulfillment,returns,shipping,[Link],thesefunctionsarehan
dled by outside firms. For example, you may manufacture or assemble a product that is sentout
dailyon trucks tosome other companythat handlesthe remaininginventoryprocesses.

Nonetheless, your company has to keep track of what it makes and what it ships out at
[Link], there are two elements here, the actual manufacturing or assembly (covered
earlier) and thetracking, storing, and moving of these products. These two functional areas are
closely tiedtogether and the interdependencies in these areas should be given special attention. If
IT systemsgo down, how are these activities impacted? If the building is ravaged by fire or flood,
how aretheseactivities impacted?

2.1.2. ManagementFunctions
It should be noted that the value of any information is derived from the actions that
managementtakes as a result of using that information. It follows that information specialists
need to knowwhat type of tasks and functions management have to perform so that they are able
to producerelevantand usableinformation.

Thefunctionsofmanagementcanbegroupedintofiveareas:planning;decisionmaking;organizationan
dco-coordinating;[Link],theemphasis given to each area
varies from manager to manager and is especially dependent on thelevelof themanager in the
organization.

There are clear differences in information requirements between a manager at the operational
ortransactional level, such as transport supervisor, and a manager at the tactical level, such
asaccounts or sales manager, or at the strategic level, such as managing director/board of
[Link] the highest (strategic) level, structured, formal MIS may actually be counter-
productive, for attheselevels informal MISand external influencesbecome increasinglyimportant.

Anotherfactorwhichaffectsthetasksamanagerhastoperform,andhencehisorherinformation
requirements, is the extent of functional authority within an organization.
Functionalauthorityisthatwhichisexercisedbyspecialists,managersandstaffthroughoutthevarious

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departments and units of the organization. Possibly, the most common example of this is
thepersonnel department which has functional responsibilities for many personnel and
industrialrelations activities throughout the whole organization. While each of the five functional
areaswhich constitute the task of management needs relevant information, three particular areas –
planning,decision makingandcontrol – makeheavydemands on theorganization‘s MIS.

Planning and decision making have rightly been called the primary management tasks and
thesetasks occur at every level of management, although naturally the type of planning and
decisionmaking will vary between the levels. Planning is the process of deciding in advance what
is to bedone and how it is to be done. The planning process results in plans which are
predeterminedcourses of action thatreflect organizational objectives and these
plansareimplemented bydecisions and actions. Thus, effective planning and decision making are
inextricably linked, forwithoutdecisions and actions, the planningprocess is asterileexercise.
Inordertoprovideappropriateinformation,MISdesignersmustbeaware ofthetypesofdecisions at the
various levels of the organization. A useful classification is that given by [Link] who
classified decision making into programmed and non-programmed.
[Link]
rsely, non-programmed decisions are novel and unstructured and the nature of the problemand
decision rules are complex and little understood. It follows from these brief descriptions
thatradically
differentinformationandproceduresarerequiredforthedifferentdecisiontypes,whichhaveobvious
implication for MIS design.
2.2. Data,Information,KnowledgeandWisdom
Activities
Dearstudentpleasedistinguishthedifferencebetweeneach ofthefollowingkeyterms
a. Data
b. Information
c. Knowledge
d. Wisdom

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Data has commonly been seen as simple facts that can be structured to become
[Link],inturn,becomesknowledgewhenitisinterpreted,putintocontext,
orwhenmeaningis added to it.
There are several variations of this widely adopted theme. The common idea is that data
issomethingless than information, and information is lessthan knowledge.
Moreover, it is assumed that we first need to have data before information can be created,
andonlywhenwehaveinformation, knowledgecanemerge.
Data
1: factual information (as measurements or statistics) used as a basis for reasoning, discussion,
orcalculation<the data is plentiful and easilyavailable.>
2: information output by a sensing device or organ that includes both useful and irrelevant
orredundantinformation and must be processed tobemeaningful.
It is raw. It simply exists and has no significance beyond its existence (in and of itself). It
canexist in any form, usable or not. It does not have meaning of itself. In computer parlance,
aspreadsheet generallystarts out byholdingdata.

Information
(1):knowledgeobtained
frominvestigation,study,orinstruction(2):intelligence,news(3):facts, data.
Itis data that hasbeengiven meaningbywayof relational connection.
This"meaning"canbeuseful,[Link],arelationaldatabasemakes
information from thedata storedwithin it.

Knowledge
:Therangeof one'sinformation.
It is the appropriate collection of information, such that it's intent is to be useful. Knowledge is
[Link]"memorizes"information(asless-aspiringtest-boundstudents
often do), then they have amassed knowledge. This knowledge has useful meaning tothem, but it
does not provide for, in and of itself, an integration such as would infer furtherknowledge. For
example, elementary school children memorize, or amass knowledge of, the"times table". They
can tell you that "2 x 2 = 4" because they have amassed that knowledge
(itbeingincludedinthetimestable).Butwhenaskedwhatis"1267x300",theycannotrespond

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correctly because that entry is not in their times table. To correctly answer such a
questionrequires a true cognitive and analytical ability that is only encompassed in the next
level...[Link],mostoftheapplicationsweuse(modeling,simulation,etc.)
exercise sometypeofstored knowledge.

Understanding
It is an interpolative and probabilistic process. It is cognitive and analytical. It is the process
bywhich I can take knowledge and synthesize new knowledge from the previously held
[Link] difference between understanding and knowledge is the difference between
"learning" and"memorizing". People who have understanding can undertake useful actions
because they cansynthesize new knowledge, or in some cases, at least new information, from
what is previouslyknown (andunderstood). That is, understanding can build uponcurrently held
information,knowledge and understanding itself. In computer parlance, AI systems possess
understanding inthe sense that they are able to synthesize new knowledge from previously stored
information andknowledge.

Wisdom
1accumulatedphilosophicorscientificlearning:Knowledge.
2. Wiseattitudeorcourseofaction.
Itisanextrapolativeandnondeterministic,[Link] levels
of consciousness, and specifically upon special types of human programming(moral, ethical
codes, etc.). It beckons to give us understanding about which there has previouslybeen no
understanding, and in doing so, goes far beyond understanding itself. It is the essence
ofphilosophical probing. Unlike the previous four levels, it asks questions to which there is
no(easily achievable) answer, and in some cases, to which there can be no humanly-known
answersperiod.
Wisdom is therefore, the process by which we also discern, or judge, between right and
wrong,good and bad. I personally believe that computers do not have, and will never have the
ability toposses‘ wisdom. Wisdom is a uniquely human state, or as I see it, wisdom requires one
to have asoul, for it resides as much in the heart as in the mind. And a soul is something
machines willnever possess (or perhaps I should reword that to say, a soul is something that, in
general, willneverpossessamachine).

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It has been contended that the sequence is a bit less involved than described by Ackoff.
Thefollowing figure represents the transitions from data, to information, to knowledge, and
finally
towisdom,[Link]
not a separate level of its own.

2.3. TheInformationNeeds andSourcesofManagers

In any organization, managers and staff working at different levels and performing different
roleshave a variety of information needs, and they use the information in various ways. We live
in aworld of information. Every day potential readers are presented with a multitude of
books,journals and newspapers. However, human capacity is limited and we can absorb only a
[Link]
interest quickly.

Informationneedsrefertotheinformationrequiredtotakedecisionscorrectlyandtocarryoutthe tasks
deriving from them. Three large sets of information needs are associated with the threestagesin
thestrategic management process:

A strategic diagnosis should be undertaken when a strategy is drawn up; in other words,
aninternal analysis and an environmental analysis – both general and specific – must be carried
[Link] an essential elementin this strategic diagnosisstage.

Information is needed on the main strategic environmental factors: cultural, financial,

political,competition, technological. This information should attend to the evolution of these
factors, aswellas their present state.

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An internal analysis requires information generated by the company itself as a result of
[Link]’sfunctions,namely,marketing,p
roduction, finance, humanresources,R&D and management.

Each member of the company involved in implementing the strategy must be aware of his or
herparticular responsibility, and must receive information on the tasks he or she has to perform–
and how to perform them – in order for the strategy and its component plans to be effectuated.
Inother words, those responsible for accomplishing these actions need information about what
theyhaveto doand [Link] informationis usuallypassed downfromhigherto lowerlevels.

Strategy control; efficient control requires knowledge on the outcomes of the actions
undertakento effectuate the plans, and how the different environmental components are evolving,
in order toverify whether the strategy is developing appropriately and whether any changes are
influencingitsviability.

Some of the information used to draw up the strategy will also be required in the control stage
[Link]
implementing the plans will also be needed at this stage. This information must be delivered
atthe right time so that when any deviations are detected in the control, opportune measures can
betakento correct them andachievethetarget sets.

We can therefore consider three sets of information needs in the management process, each
oneofwhich will requiredifferent information andwill beobtainedin differentways.

Itisextremelyimportanttorestricttheinformationtowhatisactuallyneeded,asthereisariskof
information excess, and everything that goes beyond the strictly necessity impoverishes
ratherthanenrichesthesystem,[Link]
aims to determine the optimum amount of information for a specific problem, basedon
comparing the marginal cost of the information and the value of the sample or
additionalinformation. We know what type of information we want to obtain; we now examine
the sourcesofinformation that can beusedto obtain it.

Information systems can be grouped into two distinct types: operations support systems
[Link]-to-day

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information processing needs of the organization, while management support systems
assistmanagersin decision making.

Managers use information systems to help them make decisions to run the organization. Much
ofthe information is captured by operational systems or transaction processing systems (TPS),
buttheinformation is not in a form most useful tomanagement.
Managementinformationandsupportsystemsaredesignedtoassistmanagementinthedecision-
making process, and thus contribute to the goals of the organization and the value-
addedprocesses that support those goals.
Before you study the types and levels of management support systems, you need to
understandthedecision makingandproblem-solvingprocess.

DecisionMakingAsaComponentofProblemSolving
Problem-solving abilities often separate the most valuable managers and executives from
themediocre or poor managers in terms of their contribution to the organization. The problem-
solvingmodel comprisesfive stages:
1. Intelligence stage: A problem or opportunity is identified and information gathered
torefinethe scope, resources, andconstraints.
2. Designstage:Possiblesolutionsaredeveloped andthefeasibilityof eachevaluated.
3. Choicestage:Themostappropriatesolution [Link].
4. Implementation stage: The problem is not solved until the selected solution has
beenimplemented.
5. Monitoring stage: In this final stage, the decision makers assess how well the solution
fitsthe problem and what modifications maybenecessaryto improveit.
Notice how the systems development life cycle (SDLC) follows the stages of the problem-
solving approach. This is because information systems are developed to meet the goals
andobjectives of the organization, to solve problems, and to take advantage of opportunities,
andtheseobjectives areidentical to the purposeofmanagement problem solving.

LevelsofDecisionMaking
Anotherwaytolook atmanagement is intermsofthe levelsat whichdecisionsaremade.

 Operationaldecisions

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Lower-level managers oversee the day-to-day operations, making routine operational
[Link] example, extending credit to customers and restocking inventory items from an
alternativesupplier. Many traditional transaction processing systems (TPS) are designed for this
level ofmanagement. Most accounting systems, inventory control systems, and payroll systems
performthis function. For instance, when you run Accpac Sage ERP to keep track of transactions
andgenerate financial statements, the program serves as an operations support system to handle
theroutineoperations of thebusiness.

 Tacticaldecisions
Middle-level managers, concerned with meeting short-term objectives, make tactical
[Link]
ell structured. Examples of such management activities include reviewing back orders
forinventory
items,examiningdetailedexpenseschedulestotrackexpenditures,orcomparingactualsales to budget.
MIS extends beyond the routine handling of operational information; it also provides a variety
ofreportsto assist managers in makingtactical decisions.

 Strategicdecisions
Top-level managers or executives are particularly concerned with strategic decisions.
Reportsfrom MIS form only part of the total information requirements of senior management.
Many ofthe issues dealt with at this level are semi-structured or unstructured and cannot be
[Link], DSS and ESS are computer based tools that top-level management can
use in theirstrategicplanningand decision making.

2.4. InformationSystemsFramework

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Figure2.1: InformationSystemsFramework

Foundationconcepts:Themanagerialenduserneedstohaveknowledgeofthegenericcomponents and
properties of information systems, which requires an understanding of somebasicconcepts in
general systemstheoryand information processing.

Development processes: How should managerial end users or information specialists

developinformation systems solutions to business problems?To answer this question, you should
[Link]
iessuchasthesystemsapproach,thesystemsdevelopmentlifecycle,andprototyping could be used to
construct information systems applications that successfully meetenduser and organizational
needs.

Information Technology:In this area, they should have an understanding of major

concepts,developments,andmanagementissuesininformationtechnology,[Link],Software,T
elecommunicationsandDatabasemanagement
BusinessApplications:Theyshouldgainabasicunderstandingofinformationsystemsconcepts and
applications in areas such as end user computing, office automation,
transactionprocessing,informationreporting,decisionsupport,executivesupportandartificialintellig
ence.

Management challenges:This area requires understanding the major challenges and

methodsinvolved in managing the resources, technologies, and activities of information
[Link],weshouldunderstandconceptssuchasinformationresourcemanagementan
dinformationsystems planning, implementation, and control.

2.5. BusinessSystems
A business firm is an open, adaptive organizational system operating in a business
[Link] consists of thefollowinginterrelated system components:
 Input:Economic resources such as people, money, material, machines, land,
facilities,energy, and information are acquired by a business from its environment and used
in itssystemactivities.
 Processing:OrganizationalProcessessuchasmarketing,manufacturing,andfinancetransformin
put into output.

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 Output:goods and services, payments to employees and suppliers, dividends, taxes,
andinformation are all outputs produced by a business and exchanged with or transferred to
itsenvironment.
 Feedback: A primary role of information systems is serving as the feedback component
[Link]
of theorganization.
 Control:managementisthecontrolcomponentof anorganizationalsystem.
 Managerscontroltheoperationsofabusinesssothatitsperformancemeetsorganizationalgoalss
uchasprofitability,market share,andsocialresponsibility.
 Feedback about organizational performance is compared to standards of
performanceestablished by [Link] then makes decisions to adjust
performance tomeetorganizational goals.

2.5.1. TheFundamentalRolesofISinBusiness

Althoughthereareaseeminglyendlessnumberofsoftwareapplications,therearethreefundamental
reasons for all business applications of information technology. They are found
inthethreevitalroles that informationsystems canperformfor abusinessenterprise:
 Supportofbusinessprocessesandoperations.
 Supportof decisionmakingbyemployeesandmanagers.
 Supportofstrategiesforcompetitiveadvantage.
IS illustrates how the fundamental roles interact in a typical organization. At any
moment,informationsystemsdesignedtosupportbusinessprocessesandoperationsmayalsobeprovidi
ng data to, or accepting data from, systems focused on business decision making orachieving
competitive advantage. The same is true for the other two fundamental roles of [Link]‘s
organizations are constantly striving to achieve integration of their systems to allowinformation
to flow freely through them, which adds even greater flexibility and business supportthananyof
theindividual system roles could provide.
Let‘s look at a typical retail store as a good example of how these roles of IS in business can
beimplemented.

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Support of Business Processes and Operations: - As a consumer, you regularly
encounterinformation systems that support the business processes and operations at the many
retail storeswhere you shop. For example, most retail stores now use computer-based information
systems tohelp their employees record customer purchases, keep track of inventory, pay
employees, buynew merchandise, and evaluate sales trends. Store operations would grind to a
halt without thesupportofsuchinformation systems.
Support of Business Decision Making: - Information systems also help store managers
andother business professionals make better decisions. For example, decisions about what lines
ofmerchandise need to be added or discontinued and what kind of investments they require
aretypically made after an analysis provided by computer-based information systems. This
functionnot only supports the decision making of store managers, buyers, and others, but also
helps themlookforways togain an advantageoverother retailersinthe competitionforcustomers.
SupportofStrategiesforCompetitiveAdvantage:-Gainingastrategicadvantageovercompetitors
requires the innovative application of information technologies. For example, storemanagement
might make a decision to install touch-screen kiosks in all stores, with links to thee-commerce
Web site for online shopping. This offering might attract new customers and buildcustomer
loyalty because of the ease of shopping and buying merchandise provided by suchinformation
systems. Thus, strategic information systems can help provide products and
servicesthatgiveabusiness a comparativeadvantageover itscompetitors.
Businesshasthreedimensionsof ameaning
 Businessasacommerceistheprocessthatpeopleproduce,exchangeandtradegoodsandservices.
 Businessasanoccupationistheacquiredsetofspecializedskillsandabilitiesthatallowspeopleto
create valuablegoods and services.
 Businessasanorganizationisthesystemoftaskandauthorityrelationshipthatcoordinatesandcontr
ols theinteractions betweenpeople so thattheyworktoward acommongoal.

2.5.2. E-business
Electronicbusiness(e-
business):Allelectronicallymediatedinformationexchanges,bothwithinanorganizationandwithexte
rnalstakeholderssupportingtherange ofbusiness processes.

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TheRoleof e-BusinessinBusiness
The Internet and related technologies and applications have changed the ways businesses
operateand people work, as well as how information systems support business processes,
decisionmaking, and competitive advantage. Thus, many businesses today are using Internet
technologiestoWeb-enable their businessprocesses andcreate innovative e-business applications.

Wedefinee-businessastheuseofInternettechnologiestoworkandempowerbusinessprocesses, e-
commerce, and enterprise collaboration within a company and with its
customers,suppliers,[Link],e-
businesscanbemoregenerallyconsidered an online exchange of value. Any online exchange of
information, money, resources,services,oranycombinationthereoffallsunderthee-
[Link]-like networks those inside the enterprise (intranet) and
between an enterprise and itstrading partners (extranet)have become the primary information
technology infrastructure thatsupports the e-business applications of many companies. These
companies rely on e-businessapplicationsto
(1) Reengineerinternalbusinessprocesses,
(2) Implemente-commercesystemswiththeircustomersandsuppliers,and
(3) Promoteenterprisecollaboration amongbusiness teams and workgroups.

Figure2.2:BusinessestodaydependontheInternet,intranets

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Enterprise resource planning applications (ERP) software: Provides functions for
managingbusinessareassuchasproduction,distribution,sales,financeandhumanresourcesmanageme
nt.

 ERP is the technological backbone of e-business, an enterprise wide transaction

frameworkwith links into sales order processing, inventory management and control,
production anddistributionplanning, and finance.
 Enterprise resource planning is a cross-functional enterprise system driven by an
integratedsuite of software modules that supports the basic internal business processes of a
[Link] example, ERP software for a manufacturing company will typically process
the datafrom and track the status of sales, inventory, shipping, and invoicing, as well as
forecast
rawmaterialandhumanresourcerequirements.Figure8.8presentsthemajorapplicationcomponen
tsof [Link] 8.9illustratessomeof the key cross-
functionalbusinessprocessesandsupplierand customerinformationflowssupported byERP
systems.
 ERP gives a company an integrated real-time view of its core business processes, such
asproduction,orderprocessing,andinventorymanagement,tiedtogetherbytheERPapplicationso
ftwareandacommondatabasemaintainedbyadatabasemanagement system.
 ERPsystemstrackbusinessresources(suchascash,rawmaterials,andproductioncapacity), and
the status of commitments made by the business (such as customer
orders,purchaseorders,andemployeepayroll),nomatterwhichdepartment(manufacturing,purch
asing,sales,accounting,and soon) has enteredthe datainto thesystem.
 ERP software suites typically consist of integrated modules of manufacturing,
distribution,sales, accounting, and human resource applications. Examples of manufacturing
processessupported are material requirements planning, production planning, and capacity
[Link] of the sales and marketing processes supported by ERP are sales analysis,
salesplanning,andpricinganalysis,whiletypicaldistributionapplicationsincludeordermanagem
ent, purchasing, and logistics planning. ERP systems support many vital
humanresourceprocesses,frompersonnelrequirementsplanningtosalaryandbenefitsadministrat
ion,andaccomplishmostrequiredfinancialrecordkeepingandmanagerialaccounting
applications. Figure 2.3 illustrates the processes supported by the ERP

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 systemthattheColgate-
[Link]‘stakeacloserlookatColgate‘sexperiencewith ERP.

41|Page
Figure2.3:Themajorapplicationcomponentsof enterprise resource planning.

Examplemodules:
–Sales&Distribution (SD)
–Financials(FI)
–Controlling(CO)
–MaterialsManagement(MM)
–ProjectSystem(PS)
–TimeSheet(CATS)
–Payroll
–HumanResources(HR)
–AssetAccounting(AA).

BenefitsandChallengesof ERP
Quality and efficiency: - ERP creates a framework for integrating and improving a
company‘sinternal business processes those results in significant improvements in the quality
and efficiencyofcustomer service, production,and distribution.

Decreased costs: - Many companies report significant reductions in transaction processing

costsand hardware, software, and IT support staff compared to the nonintegrated legacy systems
thatwerereplaced bytheirnew ERPsystems.

Decision support: - ERP provides vital cross-functional information on business performance

tomanagers quickly to significantly improve their ability to make better decisions in a
timelymanneracross the entirebusiness enterprise.
Enterprise agility: - Implementing ERP systems breaks down many former departmental
andfunctional walls or ―silos‖of business processes, information systems, and information

42|Page
resources. This results in more flexible organizational structures, managerial responsibilities,
andwork roles, and therefore a more agile and adaptive organization and workforce that can
moreeasilycapitalizeon newbusiness opportunities.

TheCosts ofERP
An ERP implementation is like the corporate equivalent of a brain transplant. We pulled the
[Link]
of business because if you do not do ERP properly, you can kill your company,guaranteed.

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Summary
The MIS relies heavily on the hardware and software capacity of the computer and its ability
toprocess, retrieve communicate with no serious limitations. The ability of the hardware to
storedata and process it at a very fast rate helps to deal with the data volumes, its storage and
accesseffectivelyandthesoftware,anintegralpartofacomputersystem,furtherenhancesthehardwarec
[Link] availabletohandletheproceduralandnonproceduraldataprocessing.

The ability of the computer to sort and merge helps to organize the data in a particular
mannerand process it for complex lengthy computations. Since the computer is capable of
digital,graphic, word image, voice and text processing, it is exploited to generate information
andpresentit in the form which is easyto understandforthe information user.

Theabilityofacomputersystemtoprovidesecurityofdatabringsaconfidenceinthemanagement in the
storage of data on a magnetic media in an impersonal mode. It provides
[Link],the
application of the management principles and practices in today‘s complex business world
ispossibleonlywhen theMIS is basedoncomputer system support.

Themainbusinessfunctionsare;facilitiesandsecurity,finance,humanresources,it,legal/compliance,
manufacturing(assembly),marketingandsales,operations,researchanddevelopment, warehouse
(inventory, order fulfillment, shipping, receiving)and on the other handthe five major areas of
management functions are planning, decision making, organization andcoordinating,leadership
and motivation and control.

Informationneedsrefertotheinformationrequiredtotakedecisionscorrectlyandtocarryoutthe tasks
deriving from them. Three large sets of information needs are associated with the threestages in
the strategic management process: strategic diagnosis, implementing the strategy andStrategy
control. The two main types of information systems are operations support systems
andmanagementsupport systems.

Informationsystemsframeworkincludes;foundationconcepts,developmentprocesses,informationte
chnology,businessapplications andmanagementchallenges.

44|Page
The
mainRolesofISinBusinessincludes;Supportofbusinessprocessesandoperations,Supportofdecision
makingbyemployeesandmanagersandSupportofstrategiesforcompetitiveadvantage.

ThemajorBenefitsofERPincludes;
 Qualityandefficiency
 Decreasedcosts
 Decisionsupport
 EnterpriseagilityandalsoERPhasitsowncost,thecostisdisruptionofbusinessbecauseifyoudon
otdoERPproperly,youcankillyourcompany,guaranteed.,

SelfTestQuestions

MultipleChoices
1. Across-functionalenterprisesystemdrivenbyanintegratedsuiteofsoftwaremodulesthatsupportsthebasic
internalbusinessprocesses ofa company.
A. Enterpriseresourceplanning
B. Marketinginformationsystem
C. Humanresourceplanning
D. Accountinginformationsystem

2. Oneofthefollowing is nottrueaboutthe rolesofISinbusiness.

A. Supportofbusiness processesandoperations.
B. Support ofdecision makingbyemployees andmanagers.
C. Support ofstrategiesforcompetitive advantage.
D. None oftheabove.
3. Allelectronicallymediatedinformationexchanges,bothwithinanorganizationandwithexternalstakeholde
rssupportingtherange ofbusinessprocessesis;
A. Electroniccommerce
B. Projectsystem
C. Electronicbusiness
D. All of the above

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4. isacomponentof businesssystemwhichdealswitheconomicresourcessuchaspeople,money, material,
machines, etc.
A. Feedback C. Processing
B. Input D. Output
5. Itisanextrapolativeandnondeterministic,non-probabilisticprocess.
A. Wisdom
B. Understanding
C. Knowledge
D. Information
SayTrue/False
1. Informationneedsrefertotheinformationrequiredtotakedecisionscorrectlyandtocarryoutthetasks
derivingfromthem.
2. The ability of the computer is to sort and merge helps to organize the data in a particular manner
andprocessitforcomplex lengthy computations.
3. Dataistheprocessbywhichyoucantakeknowledgeandsynthesizenewknowledgefromthepreviously
heldknowledge.
4. ERPgivesacompanyanintegratedreal-timeviewof
itscorebusinessprocesses,suchasproduction,orderprocessing, and inventorymanagement.
5. Intelligencestageistheproblem-
solvingmodelstageinwhichaproblemoropportunityisidentifiedandinformation gathered to
refinethescope, resources, andconstraints.

46|Page
 CHAPTER

THREE:INFORMATIONTECHN

OLOGY

ChapterObjectives
Attheendof thischapter,studentswillbeableto:
 UnderstandtheconceptofIT
 Explainthemainconcepts(hardwareprograms)
 Describethecommunicationtechnologies
 Explainthedatabasemanagementconcepts

3.1. INTRODUCTION

InformationTechnology(IT)initsbroadestsenseencompassesallaspectsofcomputingtechnology.
IT, as an academic discipline, is concerned with issues related to advocating
forusersandmeetingtheirneedswithinanorganizationalandsocietalcontextthroughtheselection,crea
tion,application,integration andadministration ofcomputingtechnologies.

―Information technologyis a label that has two meanings. In thebroadest sense, the term
information technology is often used to refer to all of computing. In academia, it refers
toundergraduate degree programs that prepare students to meet the computer technology needs
ofbusiness,government, healthcare, schools, andother kinds oforganizations.

. IT is a new and rapidly growing field that started as a grassroots response to the
practical,everyday needs of business and other organizations. Today, organizations of every kind
aredependent on information technology. They need to have appropriate systems in
[Link],besecure,andbeupgraded,maintained,andreplacedasapprop
riate.
3.2. TheComputerSystem
3.2.1. ComputerHardware
Activities
Dearlearnerpleaseindicatethendiscusesabout
thecomponentsofcomputerhardwarewiththeir application
47|Page
The hardware of a computer system consists of primary storage, central processing unit,
Inputdevices, secondary storage devices, output devices, buses, and communication
[Link] processing unit manipulates raw data into a more useful form and controls
the otherpartsofthe computer system.

Primary storage temporarily stores data and program instructions during processing,
whilesecondary storage devices (magnetic and optical disks, magnetic tape) store data and
programswhen they are not being used in [Link] devices, such as keyboards or the
computer"mouse", convert data and instructions into electronic form for input into the computer.
Outputdevices,suchasprinter,videodisplayterminals,convertelectronicdataproducedbythecomput
er system and display it in a form that people can [Link] devicesprovide
connections between the computer and communication networks. Buses are path
fortransmittingdata and signalsbetween the variouspartsofthe computersystem.

3.2.1. PrimaryStorage
Primary storage has three functions. It stores all or part of the program that is being
[Link] storage also stores the operation systems programs that manage the operation
of thecomputer. Finally, the primary storage area holds data that are being used by the program.
Dataandprogramareplacedinprimarystoragebeforeprocessing,betweenprocessingsteps,andafterpro
cessing has ended, prior to being returned to secondary storage or released as output.
Internalprimary storage is often called RAM, or Random Access Memory. It is called RAM
because itcan directlyaccess anyrandomlychosenlocation in thesameamount oftime.

Most of the information used by a computer application is stored on secondary storage

devicessuch as disks, and tapes, located outside the primary storage area. In order for the
computer to dowork on information, information must be transferred into primary memory for
[Link], data are continually being read into and written out of the primary storage
area duringthe execution of program .Primary storage is actually composed of semi conductors.
A
semiconductorisanintegratedcircuitmadebyprintingthousandsandevenmillionsoftinytransactions
on a small silicon chip. There are several different kinds of semi conductor
memoryusedinprimarystorage,

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Activities
Discusesabout thedifferencebetween thefollowingkeyterms
 PrimaryStorageand SecondaryStorage
 RAMandROM
 Outputdevicesand Inputdevices
 BusesandCommunicationdevices

RAM, or random access memory, is used for short term storage of data or program
[Link] is volatile: its contents will be lost when the computer's electric supply is
disrupted by apoweroutageorwhen thecomputer is turned off.

ROM, or Read Only Memory,can be only be read [Link] bewritten to. ROM chipscome
from the manufacturer with programs already "burned in" or stored. ROM is used ingeneral-
purpose computers to store important or frequently used programs (such as
computingroutinesforcalculatingthe square root ofnumbers).

3.2.2. CentralProcessingUnit(CPU)

The central processing unit (CPU) is the part of the computer system where the manipulation
ofsymbols,numbers,and letteroccurs,and itcontrolsthe otherparts ofthe computer system.
The CPU consists of central unit and an arithmetic logical unit. Located near the CPU is
primarystorage(sometimescalledprimarymemoryormainmemory)wheredataandprograminstructio
[Link],primary storage, and the
other devices in the computer system. The data bus moves data to andfrom primary storage. The
control bus transmits signals specifying whether to "read" or "write"datato orfrom a given
primarystorageaddress, input device, or output device.

Activity

CompareHowisacomputer‘scentralprocessingunit(CPU)similartothehumanbrain?

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1. ArithmeticandLogicalUnit

The arithmetic logical unit (ALU) performs the principal logical and arithmetic operations of
thecomputer. It adds, subtracts, multiplies, and divides, determining whether a number is
positive,negative,[Link]
arithmeticfunctionandALUmustbeabletodetermine when are quantity is greater than or less than
another and when two quantities [Link]
codesforlettersaswellasnumbers.

2. ControlUnit

The control unit coordinates and control the other parts of the computer system. It reads a
storedprogram, one instruction at a time, and directs other components of the computer system
toperform thetasks required by the program. The services of operationsrequired to
processasinglemachineinstruction is called the machine cycle.

The machinecyclehastwoparts:[Link] theinstruction

cycle, the control unit retrieves are program instruction from primary storage anddecodes it. It
places the part of the instruction telling the ALU what to do next in a specialinstruction register
and places the part specifying the address of the data to be used in theoperationinto an
addressregister.

Duringtheexecutioncycle,thecontrolunitlocatestherequireddatainprimarystorage,placesit in a
storage register, instructs the ALU to perform the desired operation, temporary stores theresult of
the operation in the accumulator, and finally places the result into primary memory. Asthe
execution of each instruction is completed, the control unit advances to and reads the
nextinstructionofthe program.

3.2.3. InputDevices

1. Keyboard

[Link],keyboard can be
categorized as a standard or enhanced. Standard keyboards have 10 functionkeyswhile
theenhancedkeyboards have12 function keys.
50|Page
2. Thecomputermouse
The "point and click" actions of the computer mouse have made it an increasingly
popularalternative to keyboard and text-based commands. A mouse is a hand held device that is
usuallyconnected to computer by a cable. The computer user moves the mouse around on a
desktop tocontrol the position of the curser on a video display screen. Once the cursor is in the
desiredposition, the user can push a button on the mouse to select a command. The mouse can
also beusedto "draw"images on the screen.
3. TouchScreens
Touch screens are easy to use and are appealing to people who cannot use traditional
[Link] can enter limited amounts of data by touching the surface of a sensitized video
displaymonitor with a finger or a pointer. Withcolorfulgraphics, sound,and simple menus,
touchscreenallow theusertomakeselections bytouchingspecifiedparts ofthescreen.
4. Sourcedataautomation
Source data automation captures data in computer readable form at the time and place they
arecreated. Point of sale systems, optical bar code scanners used in supermarkets, and other
opticalcharacter recognition device are examples of source data automation. One of the
advantages
ofsourcedataautomationisthatthemanyerrorsthatoccurwhenpeopleusekeyboardstoenterdata are
almost eliminated. The principal source data automation technologies are magnetic inkcharacter
recognition, optical character recognition, pen based input, digital scanner, voice
input,andsensors.
 Magneticinkcharacterrecognition (MICR)
This technology is used primarily in chequeprocessing for the banking industry. The
bottomportionof atypical chequecontains characters that arepreprinted usingaspecial ink.
A MICR reader translates the characters on cherubs that have been cashed and sent to the
bankfor processing into digital form for the computer. The amount of the cheque, which is
written inordinaryink, must be keyed in byhand.
 Opticalcharacterrecognition (OCR)
This device translates specially designed marks, characters, and codesinto digital form. Themost
widely used optical code is the bar code, which is used as a point of sale systems
insupermarketsand retail stores.

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  Penbasedinputs
Handwriting recognition devices such as pen-based "tablets" and "notebooks" are promising
newinput technologies, especially for people working in the sales or service areas or for those
whohave traditionally shunned computer key [Link] pen based inputdevicesusually
consistof a flat screen display tablet and a pen like stylus. With pen-based input, users print
directly onto the tablet sized screen. The screen is fitted with a transparent grid of five wires that
detects thepresence of the specialstylus,which emitsa faintsignalfromits tip. The screen
canalsointerpret tapping and flicking gestures made with the stylus. Pen based input devices
transformthe letters and numbers written by users on the tablet into digital form, where they can
be stored,orprocessed and analyzed.
 Digitalscanners
Digital scanners translate images such as pictures or documents into digital form, and are
anessentialcomponent ofimageprocessingsystem.
 Voiceinputdevices
Voiceinputdevicesconverts‘[Link] the
electrical patterns produced by the speaker's voice to a set of pre recorded [Link] the patterns
match, the input is accepted. Most voice system still has limited "vocabularies" ofseveralhundred
to several thousand wordsand canaccept onlyverysimple commands.
 Sensors
Sensors are devices that collect data directly from the environment for input into a
computersystem. The sensors continuously measure emission and are linked to micro computers
whichsendthe data collected bythe sensors to the centralcomputerforanalysis.

3.2.4. Outputdevices

The major data output devices are cathode ray tube (CRT) terminals (sometimes called
videodisplayterminals, orVDTs, and printers.
1. CRT
The CRT is probably the most popular form of information output in modern computer system.
Itworks much like a television picture tube, with an electronic "gun" shouting a beam of
electronstoilluminate the [Link],the higher the
[Link]
52|Page
monitor can be classified as monochrome or color and by their display capabilities. Some
displayonly text, whereas others display both text and graphics. Typical CRT display 80
columnand 24lines of text data. Display devices for graphics often utilize bitmapping. Bit
mapping allowseach pixel on the screen to be addressed and manipulated by the computer. This
requires morecomputer memory but permits finer detail and the ability to produce any kind of
image on thedisplayscreen.
2. Printers
Printers produce a printed hard copy of information output. They include impact printers
(astandard typewriter or a dot matrix) and non-impact printers (laser, inkjet, and thermal
transferprinters). Most printers print one character at a time, but some commercial printers print
an entireline or page at a time. Impact printers are slower than non-impact printers. Laser printers
formicro computers can print 4 to 8 pages per minute. Laser printers in large computers center
canprintover 100pages perminute.
3. Otherdevices
Microfilm and micro fiche have been used to compactly store output as microscopic
filmedimages, and they are mainly used by insurance companies or other firms that need to
output andstorelargenumber ofdocuments.
4. Plotters
Plotters are output device using multicolored pens to draw high quality graphic
[Link] are much slower than printers, but are useful for outputting large size charts,
maps ordrawings.
5. Voiceoutputdevice

A voice output device converts digital output data back into intelligible speech, sounds
areprerecorded,coded,andstoredondisk,[Link],when you
call for information on the telephone, you may hear a computer "voice" respond
withthetelephonenumberyou requested.

53|Page
 3.2.5. Secondarystorage

Magnetictape
Magnetic tape is an older device that is still important for secondary storage of large volume
[Link] isused primarilyin manufacturebatchapplication andfor archivingdata.
1. MagneticDisk
The most widely used secondary storage medium today is magnetic disk. There are two types
ofmagnetic disks: floppy disks and hard disks. Hard disks are thin steel plates with an iron
oxidecoating. In large systems, multiple hard disks are mounted together on a vertical shaft. Here
theread write head (disk and drive) are sealed together. That is why these devices sometimes
arecalledhard drives. Ahard disk isfound in thesystem [Link] not removable.
2. Floppydisks
Floppy disks are a removable magnetic disks primarily used with microcomputers. The two
mostcommon standard sizes are 3.5 inch and 5.25 inch disks that are made up of polyester film
withmagneticcoating.
[Link]
Optical disks, also called compact disks or laser optical disks, stores data at densities many
timesgreater than those of magnetic disks and are available for both micro computers and
largecomputers. Data are recorded on optical disks when a laser device burns microscopic pits in
thereflective layer of a spiral track. Binary information is encoded by the length of these pits and
thespacebetween them.
Optical disks can thus store massive quantities of data, including not only text but also
pictures,sound, and full motion video, in a highly compact form. The optical disk is read by
having a lowpowerlaser beamfrom an optical head scan thedisk.

[Link]

Inadditiontothemainhardwarecomponents,wehaveanumberofpartsofacomputerthatarenotmentione
d. To statesomeof them:
1. Motherboard
Itis themain boardcontainingtheCPU, RAM,ROM andadditionallydifferentexpansion slots.
2. PowerSupply

54|Page
[Link]
from the power supplywhich is found inside thesystem unit.
3. Bus
[Link]
ation (in fact composed ofbits) between devices.
4. Port

Aportisasocketatthebackofthesystemunitwhichcanbeusedtoplugacablefromperipheraldevices
likemonitors, keyboards etc.

3.3. COMPUTERSOFTWARE

Activities
1. Whatarethedifferencebetweencomputerarehardwareandcomputersoftware?
2. Listanddiscusesaboutthecomponentofthetwomaincomputersystem
whicharehardwareand softwarecomputer system
3. Wherethecompute, eachhardwareand softwareareapplied

Software is a detailed instruction that control the operations of a computer system.

Withoutsoftware,[Link]
e program is a series of statements or instructions to the computer. The process of writingor
coding programs is termed programming and individuals who specialize in this task are
[Link]‘spr
imarystoragealongwiththerequireddatainordertoexecute,orhaveitsinstructions performed by the
computer. Once the program has finished executing, the computerhardwarecan beused for
anothertaskwhen anewprogramis loaded intomemory.

55|Page
 3.3.1. Typesof software
Therearetwotypesofsoftware:systemssoftwareandapplicationsoftware.

1. Operating System Software: System software is a set of generalized programs that

managethe resources of the computer, such as the central processor, communications links,
[Link].

2. Application software: describes the programs that are written for or by users to apply
thecomputer to a specific task. Application software is primarily concerned with
accomplishingthe tasksofendusers. Many differentprogramming languagescanbe used
[Link]
tion software. Programmers who write Application software are called
applicationprogrammers. The types of software are interrelated and can be thought of as a set
of nestedboxes, each of which must interact closely with the other boxes surrounding it. The
systemsoftware surrounds and controls access to the hardware. Application software must
workthrough the system software in order to operate. End users work primarily with
applicationsoftware.

Each type of software must be specially designed to a specific machine in order to ensure
[Link]
ween application software and computerhardware.

Typesof systemsoftware

The system software that manages and controls the activities of the compute is called
[Link]
nvertprogramminglanguagesintomachinelanguageandutilityprogramthatperformcommonproces
[Link] ofthe
computer.

One way to look at the operating system is as the system's chief manager. Operating
systemsoftware decides which computer resources will be used, which programs will be run, and
[Link]

56|Page
allocates and assigns system resources. It schedules the use of computer resources and
computerjobs;and it monitors computersystem activities.

3.4. DATABASEMANAGEMENTSYSTEM(DBMS)

A group of related files make up a database. A database management system (DBMS)

issimply the software that permits an organization, to centralize data, manage them efficiently,
andprovideaccess to the stored data byapplication programs.

The DBMs acts as an interface between application programs and the physical data files.
Whenthe application program calls for data item such as gross pay, the DBMs finds this item in
thedatabase and presents it to the application program. Using traditional data files, the
programmerwouldhaveto define thedata and then tell the computerwhen theyare.

A collection of programs (SWs) that enables you to enter, organize,select data,

[Link](DBMS)isasoftwarep
ackagedesigned to storeandmanages databases.

Adatabasemanagementsystemhasthreecomponents:
1. Adatadefinitionlanguage
2. Adatamanipulationlanguage
3. A data directory
1. Data definition language:the data definition language isthe formal language used
byprogrammers to structure of the database. The data definition language defines each
dataelement as it appears in the database before that data element is translated into the
formsrequiredbytheapplication programs.

2. Datamanipulationlanguage:mostDBMshaveaspecializedlanguagecalledadatamanipulation
language that is used in conjunction with some conventional third or fourthgeneration
programming languages to manipulate the data in the database. This languagecontains
commands that permit end users and programming specialists to extracts data fromthe
database to satisfy information requests and develop applications. The most
prominentdatamanipulation languagetodayis SQL, orstructured Querylanguage.

57|Page
3. Data dictionary: the third element of DBMs is a data dictionary. This is an automated
ormanual file that stores definitions of data elements and data characteristics such as
usage,physicalrepresentation,ownership(whointheorganizationisresponsibleformaintainingthe
data), authorization, and security. Many data dictionaries can produce lists and reports
ofdatautilization, groupings, program locations, andsoon.
AdvantagesofDatabaseManagementSystem
Theadvantagesof aDBMSareas follows:
 Complexityoftheorganization'sinformationsystemenvironmentcanbereducedbycentralmanage
mentofdata, access, utilization, and security
 Dataredundancyandinconsistencycanbereducedbyeliminatingalloftheisolatedfilesinwhichthe
same dataelements arerepeated
 Dataconfusioncanbeeliminatedbyprovidingcentralcontrolofdatacreationanddefinitions
 Programdatadependencecanbereducedbyseparatingthelogicalviewofdatafromitsphysicalarran
gement
 Programdevelopmentandmaintenance costscanberadicallyreduced
 Flexibilityofinformationsystemscanbegreatlyenhanced/bypermittingrapidandinexpensivead
hocqueries of verylargepools of information
 Accessandavailabilityof informationcanbeincreased

Activities
1. DiscusesaboutProblemswiththetraditionalfileprocessing(filesmaintainedseparatelybydiffe
rentdepartments)
2. Whathappenedin thedepartmentif thereisno properdata basemanagement?

3.5. Telecommunicationandnetwork

When computers are networked, two industries—computing and communications—

converge,and the result is vastly more than the sum of the parts. Suddenly, computing
applications becomeavailable for business-to-business coordination and commerce, and for small
as well as
[Link]—

58|Page
cyberspaces—whereOrdinarycitizenscaninteract,publishtheirideas,andengageinthepurchase of
goods and services. In short, the impact of both computing And communications
onoursocietyand organizational structures is greatlymagnified.

Telecommunications and network technologies are internetworking and revolutionizing

businessand society. Businesses have become networked enterprises. The Internet, the Web, and
intranetsand extranets are networking business processes and employees together and connecting
them totheir customers, suppliers, and other business stakeholders. Companies and workgroups
can thuscollaborate more creatively, manage their business operations andresources more
effectively,andcompetesuccessfullyin today‘s fast-changing global economy.

By definition, the term network means an interconnected or interrelated chain, group, or

[Link] this definition, we can begin to identify all kinds of networks: a chain of hotels, the
roadsystem, and the names in a person‘s address book or PDA, the railroad system, the members
of achurch, club, or organization. The examples of networks in our world are virtually endless,
andcomputernetworks, thoughboth valuableAndpowerful, arejustoneexample ofthe concept.

Telecommunicationsis the exchange of information in any form (voice, data, text, images,audio,
and video) over networks. Early telecommunications networks did not use computers toroute
traffic and, as such, were much slower than today‘s computer based networks. Major
trendsoccurring in the field of telecommunications have a significant impact on management
[Link],technol
ogies, and applications that significantly increase the decision alternatives
confrontingbusinessmanagersand professionals.

TheBusinessValueofTelecommunicationsNetworks
What business value is created when a company capitalizes on the trends in
telecommunicationswe have just identified? Use of the Internet, intranets, extranets, and other
telecommunicationsnetworks can dramatically cut costs, shorten business lead times and
response times, support e-commerce, improve the collaboration of workgroups, develop online
operational processes,
shareresources,lockincustomersandsuppliers,[Link]
make applications of telecommunications more strategic and vital for businesses
thatmustincreasinglyfind new waysto compete in bothdomesticand global market
59|Page
Table3.1:Thebusinessvalueof businessapplicationsoftelecommunicationsnetworks

TheexplosivegrowthoftheInternetisarevolutionaryphenomenonincomputingandtelecommunicatio
[Link] today and has evolved
into a global information [Link] can think of theInternet as a network made up of
millions of smaller private networks, each with the ability tooperate independent of, or in
harmony with, all the other millions of networks connected to theInternet. When this network of
networks began to grow in December 1991, it had about 10servers. In January 2004, the Internet
was estimated to have more than 46 million connectedservers with a sustained growth rate in
excess of 1 million servers per month. In January 2007,the Internet was estimated to have more
than 1 billion users with Web sites in 34 languages fromEnglishtoIcelandic.

The Internet is constantly expanding as more and more businesses and other organizations
andtheirusers,computers,[Link],educational,andrese
archnetworksnowconnectmillionsofcomputersystemsandusersinmorethan200

60|Page
countries. Internet users projected for 2010 are expected to top the 2 billionuser mark, whichstill
only represents approximately one third of the worldwide population. Apply these
numberstoMetcalfe‘slaw,andyoucanseethatthenumberofpossibleconnectionsisextraordinary.

TheNetdoesn‘[Link],however, 13
servers called root servers that are used to handle the bulk of the routing of trafficfrom one
computer to another. Each message sent has a unique address code, so any Internetserver in the
network can forward it to its destination. Also, The Internet does not have aheadquarters or
governing body. International advisory And standards groups of individual andcorporate
members, such as the Internet Society([Link]) and the World Wide
WebConsortium([Link]),promoteuseoftheInternetandthedevelopmentofnewcommunicatio
ns standards. These common standards are the key to the free flow of messagesamong the widely
different computers and networks of the many organizations and Internetserviceproviders(ISPs)
in the system.

One of the unique aspects of the Internet is that nobody really owns it. Anyone who can
accessthe Internet can use it and the services it offers. Because the Internet cannot be accessed
directlyby individuals, we need to use the services of a company that specializes in providing
easyaccess.

Activities

Distinguishthedifferencebetweenthefollowingkeytypesoftelecommunicationnetworkwiththeirappli
cation and values in business

1. Internet
2. Intranet
3. Extranet

Internetserviceprovider
[Link],
the service providergivesyouasoftwarepackage,username,password,andaccess

61|Page
phone number or access protocol. With this information (and some specialized hardware),
youcanthen logonto the Internet, browsetheWorld WideWeb, and send andreceivee-mail.

In additiontoserving individuals,ISPs serve large companies, providing a

directconnectionfromthecompany‘[Link]
eanother through network access points. Through these connections, one ISP can easily connect
toanotherISP to obtain information aboutthe address of AWeb siteoruser node.
InternetApplications
The most popular Internet applications are e-mail, instant messaging, browsing the sites on
theWorld Wide Web, and participating in newsgroups and chat [Link] e-mail
messagesusually arrive in seconds or a few minutes anywhere in the world and can take the form
of data,text,fax,[Link]
enables millions of users to surf the World Wide Web by clicking their way to themultimedia
information resources stored on the hyperlinked pages of businesses, government,and other Web
sites. Web sites offer information and entertainment and are the launch sites for e-
commercetransactions between businesses andtheir suppliersand customers.

TheInternetprovideselectronicdiscussionforumsandbulletinboardsystemsformedandmanaged by
thousands of special-interest newsgroups. You can participate in discussions or
[Link]
udedownloadingsoftwareandinformationfilesandaccessingdatabasesprovided by a variety of
business, government, and other organizations. You can conduct onlinesearches for information
on Web sites in a variety of ways by using search sites and searchengines such as Yahoo!,
Google, and Fast Search. Logging on to other computers on the Internetand holding real-time
conversations with other Internet users in chat rooms are also popular usesoftheInternet.

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Table3.2:Popularusesofinternet
TheBusinessValueoftheInternet
TheInternet provides asynthesis of computing and communication capabilities that adds valueto
everypart ofthe business cycle.

What business value do companies derive from their business applications on the
Internet?Substantial cost savings can arise because applications that use the Internet and Internet-
basedtechnologies (like intranets and extranets) are typically less expensive to develop, operate,
andmaintain than traditional systems. For example, an airline saves money every time customers
useits Web site instead of its customer support telephone [Link] is estimated that for
certaintypesoftransactions,thetransactioncostsavingsaresignificantforonlineversusmoretraditional
channels for example, booking a reservation over the Internet costs about 90 percentless for the
airline than booking the same reservation over the telephone. The banking industryhas also found
significant cost savings via the Internet. A typical online banking transaction(payments, balance
inquiry, check payment) is estimated to cost anywhere from 50 percent to 95percent less than its
bricks-and-mortar counterpart. Other primary sources of business valueinclude attracting new
customers with innovative marketing and products, as well as retainingpresent customers with
improved customer service and support. Summarize, most companies arebuildinge-business
ande-commerceWeb sitesto achievesixmajorbusinessvalues:
 Generatenew revenuefromonlinesales.

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 Reducetransactioncoststhroughonlinesalesandcustomersupport.
 Attractnew customersvia Webmarketingandadvertisingandonlinesales.
 Increasethe loyaltyof existingcustomers viaimproved Web customerserviceand support.
 DevelopnewWeb-basedmarketsanddistributionchannelsfor existingproducts.
 Developnewinformation-based productsaccessible on theWeb.

TheRoleof Intranets
Many companies have sophisticated and widespread intranets, offering detailed data
retrieval,collaborationtools,personalizedcustomerprofiles,andlinkstotheInterInvestingintheintrane
t,theyfeel, is as fundamentalas supplyingemployees with atelephone.

Before we go any further, let‘s redefine the concept of an intranet, to emphasize specifically
howintranets are related to the Internet and extranets. Anintranet network inside an
organizationthat uses Internet technologies (such as Web browsers and servers, TCP/IP network
protocols,HTML hypermedia document publishing and databases, and so on) to provide an
Internet-likeenvironment within the enterprise for information sharing, communications,
collaboration,
[Link],
encryption, and firewalls, and thus can be accessed by authorized users through theInternet. A
company‘s intranet can also be accessed through the intranets of customers,
suppliers,andotherbusiness partners via extranet links.

Communications and Collaboration:-Intranets can significantly improve communications

andcollaboration within an enterprise. For example, you can use your intranet browser and your
PCor NC workstation to send and receive e-mail, voice mail, pages, and faxes to communicate
withothers within your organization, as well as externally through the Internet and extranets. You
canalsouse intranetgroupware features toimprove teamand projectcollaboration
withservicessuchas discussion groups, chat rooms,and audioand videoconferencing.

WebPublishing:-
Theadvantageofdevelopingandpublishinghyperlinkedmultimediadocumentstohypermediadatabas
[Link],attracti
veness,andlowercostofpublishingandaccessingmultimediabusinessinformationinternallyviaintran
[Link]
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ample,

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information products as varied as company newsletters, technical drawings, and product
catalogscanbepublishedinavarietyofways,includinghypermediaWebpages,e-
mail,andnetbroadcasting, and as part of in-house business applications. Intranet software
browsers, servers,andsearchengines canhelpyoueasilynavigate
andlocatethebusinessinformationyou need.

BusinessOperationsandManagement:-Intranetshavemovedbeyondmerelymakinghypermedia
information available on Web servers or pushing it to users via net [Link] are
also being used as the platform for developing and deploying critical
businessapplicationstosupportbusinessoperationsandmanagerialdecisionmakingacrosstheinternet
[Link],manycompaniesaredevelopingcustomapplicationslike order
processing, inventory control, sales management, and enterprise information portalsthat can be
implemented on intranets, extranets, and the Internet. Many of these applications aredesigned to
interface with and access existing company databases andlegacy systems. Thesoftware for such
business uses is then installed on intranet Web servers. Employees within thecompany or
external business partners can access and run such applications using Web
browsersfromanywhereon the networkwhenever needed.

TheRoleof Extranets
As businesses continue to use open Internet technologies [extranets] to improve
communicationwith customers and partners, they can gain many competitive advantages along
the way—inproductdevelopment,costsavings,marketing,
distribution,andleveragingtheirpartnerships.

As we explained previously,extranetsare network links that use Internet technologies

tointerconnect the intranet of a business with the intranets of its customers, suppliers, or
otherbusiness partners. Companies can establish direct private network links among themselves
orcreate private, secure Internet links called virtual private networks (VPNs). (We‘ll look
moreclosely at VPNs later in this chapter.) Or a company can use the unsecuredInternet as
theextranetlinkbetweenitsintranetandconsumersandothersbutrelyontheencryptionofsensitive data
and its own firewall systems to provide adequate security. Thus, extranets
enablecustomers,suppliers,consultants,subcontractors,businessprospects,andotherstoaccessselecte
dintranet Web sites and other companydatabases.

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TelecommunicationsNetworkAlternatives
Telecommunicationsisahighlytechnical,rapidlychangingfieldofinformationsystemstechnology.M
[Link],itisn
ecessarythatyouunderstandsomeoftheimportantcharacteristics of the basic components of
telecommunications networks. This understanding willhelp youparticipate
effectivelyindecisionmakingregardingtelecommunicationsalternatives.

Telecommunicationsnetwork
Generally, a communications network is any arrangement in which a sender transmits a
messagetoa Receiver overachannel consistingof some typeof medium.
Telecommunicationsnetwork,tconsistsoffivebasiccategoriesofcomponents:
 Terminals, such as networked personal computers, network computers, or
[Link]/outputdevicethatusestelecommunicationsnetworkstotran
smitorreceive datais aterminal, includingtelephonesandthe variouscomputer terminals.
 Telecommunicationsprocessors,whichsupportdatatransmissionandreceptionbetween
terminals and computers. These devices, such as modems, switches, and routers,perform
a variety of control and support functions in a telecommunications network. Forexample,
they convert data from digital to analog and back, code and decode data,
andcontrolthespeed,accuracy,andefficiencyofthecommunicationsflowbetweencomputersa
nd terminalsin a network.
 [Link]
tions channels may use combinations of media, such as copper
wires,coaxialcables,orfiber-
opticcables,orusewirelesssystemslikemicrowave,communicationssatellite,radio,andcellula
rsystemstointerconnecttheothercomponentsof atelecommunications network.
 Computers of all sizes and types are interconnected by telecommunications networks
[Link],amainframe
computer may serve as a host computer for a large network, assisted by amidrange
computer serving as a front-end processor, while a microcomputer may act as
anetworkserverin a smallnetwork.
 Telecommunicationscontrolsoftwareconsistsofprogramsthatcontroltelecommunications
activitiesandmanagethefunctionsoftelecommunicationsnetworks.

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 Examplesincludenetworkmanagementprogramsofallkinds,suchastelecommunicationsmon
itorsformainframehostcomputers,networkoperatingssystems for network servers, and
Web browsers for [Link] matter howlarge and complex real-world
telecommunications networks mayappear to be, these fivebasic categories of network
components must be at work to support an organization‘stelecommunications activities.
This is the conceptual framework you can use to help youunderstandthe various typesof
telecommunications networksin usetoday.

Table3.3:Keytelecommunicationsnetworkcomponent categories andexamples.

TypesofTelecommunicationsNetworks
Wide AreaNetworks: Telecommunications networkscovering a large geographic area
arecalledwide area networks (WANs). Networks that cover a large city or metropolitan
area(metropolitan area networks) can also be included in this category. Such large networks
havebecome a necessity for carrying out the day-to-day activities of many business and
[Link],WANsareusedbymanymultinationalcomp
anies to transmit and receive information among their employees, customers, suppliers,
andotherorganizations across cities, regions, countries, andtheworld.

Metropolitan Area Networks: When a wide area network optimized a specific

geographicalarea,itisreferredtoasametropolitanareanetwork(MAN).Suchnetworkscanrangefrom

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several blocks of buildings to entire cities. MANs can also depend on communications
channelsof moderate-to-high data rates. A MAN might be owned and operated by a single
organization,but it usually will be used by many individuals and organizations. MANs might also
be ownedand operated as public utilities. Your local cable provider or a local telephone company
isprobably operating on a MAN. MANs will often provide means for internetworking of local
areanetworks.

Thefivebasiccomponentsinatelecommunicationsnetwork:(1)terminals,(2)telecommunicationsproc
essors,(3)Telecommunicationschannels,(4)computers,and(5)telecommunicationssoftware.

Figure3.3: Thefive basiccomponentsin atelecommunications network

Local area networks (LANs)connect computers and other information processing

deviceswithin a limited physical area, such as an office, classroom, building, manufacturing
plant,
[Link]
ations network capabilities that link end users in offices, departments, and
[Link] use a variety of telecommunications media, such as ordinary
telephonewiring,coaxialcable,orevenwirelessradioandinfraredsystems,tointerconnectmicrocompu
ter workstations and computer peripherals. To communicate over the network, eachPC usually
has a circuit board called a network interface card. Most LANs use a more
powerfulmicrocomputerwith alargehard disk capacity, calledafileserveror

Networkserver,whichcontainsanetworkoperatingsystemprogramthatcontrolstelecommunication
s and the use and sharing of network resources; For example, it
distributescopiesofcommondatafilesandsoftwarepackagestotheothermicrocomputersinthenetwork

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and controls access to shared laser printers and other network peripherals. Many
organizationsusevirtual private networks (VPNs)to establish secure intranets and extranets. A
virtualprivate network is a secure network that uses the Internet as its main backbone network
but
reliesonnetworkfirewalls,encryption,andothersecurityfeaturesofitsInternetandintranetconnections
and those of participating organizations. Thus, for example, VPNs would enable acompany to
use the Internet to establish secure intranets between its distant branch offices
andmanufacturingplantsandsecureextranetsbetweenitselfanditsbusinesscustomersandsuppliers.

Client/server networkshave become the predominant information architecture of enterprisewide

computing. In a client/server network, end-user PC or NC workstations are the clients theyare
interconnected by local area networks and share application processing with network
servers,which also manage the networks. (This arrangement of clients and servers is sometimes
calledtwo-tier client/server architecture.) Local Area networks (LANs) are also interconnected to
otherLANsand wideareanetworks (WANs) of clientworkstations and servers

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Table3.4:Informationportalforapplicationsincommunicationandcollaboration

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Summary
Thischapterfamiliarizesyouwithnetworkingandconnectivity,telecommunications,theInternet, and
World Wide Web and gives you the basic information you need for appreciating
thesignificanceof thesedevelopments in medicine.
 ITincludesnotonlycomputersbutalsocommunicationsnetworksand computerliteracy.
 Computerliteracyis knowledgeof computers andtheirfunctions.
 Acomputerisanelectronicdevicethatcanacceptdataasinput,processthedata,andproduceinforma
tion asoutput followingstep-by-stepinstructions called aprogram.
 Insideadigitalcomputer,alldataandinformationarerepresentedbycombinationsofbinarydigits(b
its).
 Physicalcomponentsofacomputerarecalledhardware.
 Inputdevicesdigitizedata,sothat thecomputer canprocessthedata.
 Inputdevicesincludekeyboards anddirect-entrydevices.
 Direct-
entrydevicesincludepointingdevices,scanningdevices,smartcards,opticalcards,
sensors, and human-biologyinput devices.
 The system unit includes the CPU, which is comprised of the arithmetic-logic unit and
thecontrol unit, and memory, which temporarily stores the work you are currently doing.
TheCPUandmemoryworktogetherfollowingtheinstructionsofaprogramtoprocessdatainto
information.
 Outputdevices(printersandmonitors)presenttheprocessedinformationtotheuser.
 Secondary storage devices(drives) and media (diskettes, hard disks, optical disks,
Zipdisks,magnetictape,andsolid-
statememorydevices)allowyoutostoreinformationpermanently.
 Software (programs) is comprised of the step-by-step instructions that tell the
hardwarehowto process data.
 Softwareisclassifiedassystemsoftware,whichcontrolsthebasicoperationofthehardware,andap
plication software,which completes tasks forthe user.
 When computers are connected in networks, the data that are transmitted travel over a
pathormedium.
 Datatransmissionis governedbytechnical standardsorrules calledprotocols.

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  Wirelesstransmissionisbecomingmoreandmorecommonwiththewidespreaduseofcellphones
andother wireless devices.
 Theconnectionofcomputersandcommunicationsdevicesintonetworksmakesmanythingspossi
ble, includingtelemedicine.
 TheInternetisaglobalnetworkofnetworks,whichmakesvastamountsofinformationavailable.
 TheWorldWideWebispartoftheInternet,organizedasdocumentswithlinkstootherdocuments.
 Speech-recognitionsoftwareis gettingbetterand better.

SelfTestQuestions
MultipleChoices
1. Whichoneofthefollowingisoutput device?
A. Printers
B. Diskettes
C. Hard disks
D. Opticaldisks
2. isone ofsecondarystorage device.
A. Monitor
B. Keyboard
C. Mouse
D. Magnetictape
3. iscomprisedofthearithmetic-logicunitandthecontrol unitandmemory
A. Scanner
B. Printer
C. CPU
D. None oftheabove
4. Direct-entrydevicesinclude;
A. pointingdevices
B. scanningdevices
C. Smart cards
D. All of the above
5. Acomputerliterateperson .

73|Page
 A. canuse a computertoperform tasksinhis orherfield
B. isgenerallyfamiliarwithwhat acomputercando
C. canprograma computer
D. A andB
SayTrue orFalse
1. Software(programs)iscomprisedofthestep-by-stepinstructionsthattellthehardwarehowtoprocessdata.
2. Physicalcomponents ofa computerarecalledhardware.
3. ITincludesonlycomputersbutalsocommunicationsnetworksandcomputerliteracy
4. TheWorld Wide Web ispartoftheInternet,organizedas documentswith linkstootherdocuments.
5. TheInternetisaglobalnetworkofnetworks,whichmakesvast amountsof informationavailable.

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 CHAPTERFOUR

COMMONBUSINESSAPPLICATIONSOFINFORMATIONSYSTEM

ChapterObjectives
Attheendof thischapter,studentswillbeableto:
 Understandthetypes of IS
 Distinguishthedifferencebetweendifferenttypes ofIS
 Describethesimilaritybetweenthetypes of IS
 ExplaintheimportanceofIS
 ThepurposeofstudyingaboutIS

4. Introduction
Information systems can be designed to support the functional areas or traditional
departmentssuch as, accounting, finance, marketing, human resources, and manufacturing, of an
organizationSuch systems are classified as ‗functional information systems‘. Functional
information systemstypicallyfollow theorganizational structure

Functional information systems are typically focused on increasing the efficiency of a

particulardepartment or a functional area. One disadvantage of functional systems is that
although theymay support a particular functional area effectively, they may be incompatible to
each
other(NOinteractionbetweeninternalsystems).Suchsystems,ratherthanaidingorganizationalperfor
mancewill act asinhibitors to anorganization's development and change.

Organizationshaverealizedthatinordertobeagileandefficienttheyneedtofocusonorganizationalproce
[Link] are cross-
functional

�Example: A TPS can affect several different business areas: Accounting,

HumanResources,Production, etc.

�[Link],Marke
tinginformationsystem,Accountinginformationsystem,manufacturinginformation

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 system,Humanresourceinformation system etc.

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[Link] areas

4.1. Marketinginformationsystem(MkIS)
A marketinginformationsystem (MkIS)isamanagement informationsystem
(MIS)designedtosupport marketing [Link](2007)definesitasa"system inwhich
marketing data isformally gathered, stored, analysedand distributed to managers
inaccordancewith their informational needs on aregularbasis.

A system that analyzes and assesses marketing information, gathered continuouslyfrom

sources inside andoutside an [Link] marketing information provides basisfor
decisions suchas developmentor improvement,pricing, packaging, distribution,
mediaselection,and [Link] system.

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Activity
1. Howcanbeaninformationsystemapplied inmarketingbusiness?
2. Whataretheactivitiesobjectiveandbenefitofmarketinginformationsystem?

Thecomponentsofa modernmarketinginformationsystem:

A marketing information system consists of people, equipment and procedures to gather,

sort,analyze, evaluate, and distribute needed, timely, and accurate information to marketing
decisionmakers.

But if you fail to allocate adequate resources to your marketing effort, or if you fail to
properlyorganize your effort, the information you provide might well turn out to be irrelevant,
late, andincorrect. Remember that a poor marketing information system is worse than unhelpful.
It can bedownrightharmful.

Thefourmain componentsofMarketingInformationSystem(MIS)are:
 InternalRecords.
 MarketingIntelligence.
 MarketingResearch(MR),and
 MarketingDecisionSupportSystem.
ThebasiccomponentsofMIS aredepictedandexplainedbelow.

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1. Internal Records: The first component of MIS is ‗Internal Record‘. The foundation of
anymarketingsystemisthecompany‘[Link]‘sop
erations,thebetteryouwillbeabletosuggeststrategiesforimprovingperformance.
Marketing managers get lots of information from the internal-records of the company.
Theserecordsprovidecurrentinformationaboutsales,costs,inventories,cashflowsandaccountreceiva
ble and payable. Many companies maintain their computerized internal records.
Insiderecordshelp marketingmanagerstogainfasteraccess toreliableinformation.
2. Marketing intelligence: A marketing intelligence system is a set of procedures and
sourcesusedbymanagerstoobtaineverydayinformationaboutdevelopmentsinthemarketingenvironm
ent.
It collects information from external sources. It provides information about current marketing-
[Link]
external sources like; magazines, trade journals, commercial press, so on. This
informationcannotbecollectedfromtheAnnualReportsoftheTradeAssociationandChambersofCom
merce, Annual Report of Companies, etc. The salesmen‘s report also contains
informationaboutmarket trends.

The information which is collected from the external sources cannot be used directly. It must
befirst evaluated and arranged in a proper order. It can be then used by the marketing manager
fortakingdecisions and makingpolicies about marketing.
3. Marketing Research (MR): Marketing Research is the systematic design, collection
analysisand reporting of data and findings relevant to a specific marketing situation facing the
[Link] conducted to solvespecific marketingproblemsof the company.

TheMarketingResearchProcess

Those responsible for carrying out your marketing research will have to go through five
basicsteps.

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Step1:Definetheproblem andtheresearchobjectives

You‘ve got to start by coming up with the best possible definition of the problem and
yourresearch objectives. What problem are you trying to solve? What do you need to know to
solvetheproblem? Whatgoesintogoodanswers tothesequestions? Whatcharacterizes badanswers?

Step2:Developtheresearch plan

All right. You‘ve got your problem and your objectives. Now you need a plan to help you
[Link]‘salot to consider.

Youneedtothinkaboutyour datasources.
Whereareyougoingtogetyourinformation?Youneedtothinkaboutyour researchapproach. How
areyougoingtocollectyourinformation?
You need to think about your research instruments. What are you going to use to collect
yourinformation?
You need to have a sampling plan. Who are you going to collect your information from?
Howcanyou besurethatyoursampleis representative?

Once you‘ve decided on your sampling plan, what contact methods are you going to use?
Willyouknock on doors, send letters, makecalls, or send e-mails?

Step3:Collecttheinformation

Here‘s where all your planning goes into action. And this is where you‘re likely to spend
thegreatest portion of your budget. It‘s critical that you do everything you can prevent errors
[Link].

Step4:Analyzetheinformation

Now you need to turn your raw data into usable information. How can you organize
yourfindings so they shed the clearest light on your research problem? How can you use statistics
toreveal,and not distort, thereal meaningofyour data?

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Step5:Present thefindings

Finally, you need to present your findings in a way that effectively communicates its
significanceto decision makers. They‘re the ones that need to understand your results and it‘s
your job tomakesuretheydo.

4. Marketingdecisionsupportsystem:

The fourth component of MIS is ‗Marketing Decision Support System‘. These are the
toolswhich help the marketing managers to analyze data and to take better marketing decisions.
Theyinclude hardware, i.e. computer and software programs. Computer helps the marketing
managerto analyze the marketing information. It also helps them to take better decisions. In fact,
todaymarketing managers cannot work without computers. There are many software programs,
whichhelpthemarketingmanagerto domarketsegmentation,pricefixing,advertising budgets,etc.

It helps managers in providing evidence for the decisions taken by them. The current
marketingsoftware programs assist in designing marketing research studies, market
segmentation, sellingprices,budget, analyzingmedia, andplanningsales forceactivity.

4.2. Humanresourceinformationsystem(HRIS)

A HumanResources Management System (HRMS)or HumanResourcesInformationSystem

(HRIS),referstothe systems andprocessesattheintersectionbetween humanresourcemanagement
(HRM) andinformationtechnology

Human Resources Management (HRM) is the attraction, selection, retention, development,

andutilization of labor resource in order to achieve both individual and organizational
[Link](HRIS)isanintegrationofHRMandInformationSy
stems (IS). HRIS or Human resource Information system helps HR managers perform
HRfunctions in a more effective and systematic way using technology. It is the system used
toacquire, store, manipulate, analyze, retrieve, and distribute pertinent information regarding
anorganization's human resources. A human resource information system (HRIS) is a system
usedto acquire, store, manipulate, analyze, retrieve, and distribute pertinent information about
anorganization'shumanresources(Tannenbaum,1990).TheHRISsystemisusuallyapartofthe

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organization's larger management information system (MIS) which would include
accounting,production, and marketing functions, to name just a few. Human resource and line
managersrequire good human resource information to facilitate decision-making. An extensive
study byTowers Perrin studyrevealed thefollowingbenefits of

Applicationof HRIS

Activities

Dearstudentpleasediscusesabouttheareawhichhumanresourcemanagementinformationsystemapp
lied

HRIScan beappliedin thefollowingareas of HRM

 HRplanning
 Successionplanning
 Workforceplanning
 Workforcedynamics analysis
 Staffing
 Applicantrecruitmentandtracking
 Employeedata basedevelopment
 Performancemanagement
 Learninganddevelopment
 Compensationandbenefits
 Payroll
 Jobevaluation
 Salarysurvey
 Salaryplanning
 Internationalcompensation
 Benefitsmanagement
 DevelopinnovativeOrg. Structure
 DevelopIT

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HRISBenefits:

HRIShasshowed manybenefitsto theHRoperations. Afewofthemcanbedetailedas;

o Fasterinformationprocess,
o Greaterinformationaccuracy,
o Improvedplanningand programdevelopment,and
o Enhanced employeecommunications(Overman,1992).

4.3. FinancialManagementInformationSystems
Financial Management Information Systems accumulate and analyze financial data in order
tomake good financial management decisions in running the business. It is a Computer-
basedfinancialinformation systems supportfinancial managers indecisions concerning:

1. Thefinancingof abusiness

2. Theallocationandcontrolof financialresourceswithinabusiness.

FMIS is theacronymfor the term ―FinancialManagementInformation Systems‖.

The basic objective of the financial information system is to meet the firm's financial
obligationsas they come due, using the minimal amount of financial resources consistent with an
establishedmargin of safety. Outputs generated by the system include accounting reports,
operating andcapitalbudgets,workingcapitalreports,cashflowforecast,andvariousWhat-
[Link],trendevalua
tion, and financial planning modeling. Financial planning and forecasting are facilitated ifusedin
conjunction with a Decision Support System (DSS).

Activity

1. WhatisFinancialManagementInformationSystems?
2. Howfinancialinformationsystemappliedinfinancialresourceof theorganization?

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Financialmanagementinformationsystemis:

 Informationsystemthattracksfinancialeventsandsummarizesinformation
 supportsadequatemanagement
reporting,policydecisions,fiduciaryresponsibilities,andpreparationofauditablefinancial
statements
 Shouldbedesignedwithgoodrelationshipsbetweensoftware,hardware,personnel,procedures
,controls anddata
Generally, financialmanagementinformationsystemreferstoautomatingfinancialoperations.

FeaturesofFMIS

As the name implies, there are, and should be, three guiding characteristics for a well-
designedFMIS:

Itisamanagementtool

WhendevelopinganFMISitisimportantthatitcatertomanagementneeds—
notjustthoseofthecentralagencies,[Link],asamanagementtoolitshouldsupp
ortthe management of change. It must be viewed as an integral part of budget system reform—
hence not be designed just to meet present requirements, but also to support those needs that
arelikelyto ariseas parallel budget reformsareimplemented.

Itshouldprovideawiderangeof nonfinancialand financialinformation

As a tool of management it should provide the information required for decision making. For
thispurpose it is anchored in the government accounting system, and should be designed to
performall necessary accounting functions as well as generate custom reports for internal and
externaluse. However, this does not mean that it should exclusively concentrate on financial
[Link] will requireother nonfinancial information.

For example, personnel information such asnumbers of employees,theirgrade within

theorganizational structure and rates of remuneration. For performance-based budgets,
performanceinformationwillbeimportanttomanagers,suchastheidentificationofprograms,theobject
ives

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or outcomes of programs, the types of goods and services produced, as well as indicators
bywhichto judgetheefficiencyand effectiveness of programs.

It is a system

Its role is to connect, accumulate, process, and then provide information to all parties in
thebudget system on a continuous basis. All participants in the system, therefore, need to be able
toaccess the system, and to derive the specific information they require to carry out their
differentfunctions. The converse is also true, if the FMIS does not provide the required
information—thatis, has not the right functionality—it will not be used, and will cease to fulfill
its central functionas a system. Further, by automating procedures and internal controls, it
strengthens financialcontrolsand promotes accountability.

TheIdealFMISSystems

Anidealorwell-designedsystem should:

 Collectaccurate,timely,complete,reliable,consistentinformation
 Provideadequatemanagement reporting
 Support government-wide andagencypolicydecisions
 Supportbudgetpreparationandexecution
 Facilitatefinancialstatementpreparation
 Provideinformationforcentralagencybudgeting,analysisandgovernment-widereporting
 Providecompleteaudittrailtofacilitateaudits.

Majorfinancialinformationsystemcategoriesinclude:

1. Cashandsecuritiesmanagement

2. Capitalbudgeting

3. Financialforecasting

4. Financialplanning

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Cash Management:

Cashmanagementsystemscollectinformationonallcashreceiptsanddisbursementswithinacompanyo
n areal timeor periodicbasis. Cash management systems:

1. Allowbusinessestodepositorinvestexcessfundsmorequicklyandthusincreasetheincomegenerate
dbydeposited or invested funds.
2. Producedaily,weekly,ormonthlyforecastsofcashreceiptsordisbursements(cashflowforecast)that
areusedtospot futurecash deficitsorsurpluses.

OnlineInvestmentManagement:

Many businesses investtheir excess cash in short-term low-risk marketable securities or

inhigherreturn/higherriskalternatives,sothatinvestmentincomemaybeearneduntilthefundsarerequir
ed. Online investmentmanagement services:

1. Help a financial manager make buying, selling, or holding decisions for each type of
securitysothatanoptimummixofsecuritiesisdevelopedthatminimizesriskandmaximizesinvestme
ntincome forthebusiness.

CapitalBudgeting:

Thecapitalbudgetingprocessinvolvesevaluatetheprofitabilityandfinancialimpactofproposed
capital [Link] application makes heavy use of spreadsheet models thatincorporate
present value analysis of expected cash flows and probability analysis of risk todeterminethe
optimum mixof capital projectsforabusiness.

FinancialForecastingandPlanning:

A variety of financial forecasting packages provide analytical techniques that result in

economicor financial forecasts of national and local economic conditions, wage levels, price
levels, andinterestrates.

Financial Planning systems use financial planning models to evaluate the present and
projectedfinancial performance of a business or of one of its divisions or [Link]
planningsystems:

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 1. Help determine the financial needs of a business and analyze alternative methods
offinancingthe business.
2. Use financial forecasts concerning the economic situation, business operations,
andtypes of financing available, interest rates, and stock and bond prices to develop
anoptimalfinancingplanfor thebusiness.
3. They frequently use electronic spreadsheet packages and DSS generators to build
andmanipulatemodels.
4. Are used to answer what-if and goal-seeking questions in order to evaluate
financialandinvestment alternatives.
AdvantagesofFMIS

Therearemanyadvantagesof implementinganFMIS. Afewofthemarelistedbelow:

 Integratedfinancialinformation
 Flexibilityof reportingand additional control over expenditure
 Less administrationrequiredwithinthebusiness

4.4. AccountingInformationSystems
[Link]
mputer based accountinginformationsystems:

1. Recordandreporttheflowoffundsthroughanorganizationonahistoricalbasisandproduceim
portantfinancialstatements suchasbalancesheetsandincome statements.

2. Produceforecastsoffutureconditionssuchasprojectedfinancialstatementsandfinancialbud
gets.

OperationalAccountingSystems -[Link]:

1. Legalandhistoricalrecord-keeping

2. Productionofaccuratefinancialstatements.

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Typically,thesesystemsincludetransactionprocessingsystemssuchas:

1. Orderprocessing [Link]

2. Inventorycontrol [Link]

3. Accountsreceivable [Link]

Management Accounting Systems - focus on the planning and control of business

[Link]:

1. Costaccountingreports

2. Developmentoffinancialbudgets&projected financialstatements

3. Analyticalreportscomparingactualtoforecastedperformance.

Thesixmost widelyusedaccountinginformationsystemsinclude:

1. OrderProcessing [Link]

2. InventoryControl [Link]

3. AccountsReceivable [Link] Ledger

OnlineAccountingSystems:

Accounting information systems are being affected by Internet and client/server

[Link] the Internet, intranets, extranets, and other networks changes how accounting
informationsystems monitor and track business activity. The online, interactive nature of such
networkscalls for new forms of transaction documents, procedures, and [Link] particularly
appliesto systems like order processing, inventory control, accounts receivable, and accounts
[Link] systems are directly involved in the processing of transactions between a business
and itscustomers and suppliers. Many companies are using or developing network links to
thesetradingpartnersforsuchapplications,usingtheInternet orothernetworks.

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OrderProcessing:

Order processing, or sales order processing, is an important transaction processing system

thatcapturesandprocessescustomerordersandproducesdataneededforsalesanalysisandinventory
[Link] many firms, it also keeps track of the status of customer orders until
goodsaredelivered. Computer-based sales order processingsystems:

1. Provide a fast, accurate, and efficient method of recording and screening customer
ordersandsales transactions.
2. Provide inventory control systems with information on accepted orders so they can
befilledas quicklyas possible.

InventoryControl:

[Link]-
basedinventorycontrol system:

1. Recordschangesto inventorylevels andpreparesappropriateshippingdocuments

2. Maynotifymanagersaboutitemsthatneedreorderingandprovidethemwithavarietyofinventorystat
us reports.
3. Helpabusinessprovidehigh-
qualityservicetocustomerswhileminimizinginvestmentininventoryand inventorycarryingcosts.

AccountsReceivable:
Accountsreceivablesystemskeeprecordsofamountsowedbycustomersfromdatageneratedbycustom
er purchasesand payments. Accounts receivablesystems:

1. Produceinvoicestocustomers,monthlycustomer statementsandcreditmanagementreports.
2. Stimulatepromptcustomerpaymentsbypreparingaccurateandtimelyinvoicesandmonthlystateme
ntsto credit customers
3. Providemanagerswithreportstohelpthemcontroltheamountofcreditextendedandthecollection
ofmoneyowed.
4. Helptomaximizeprofitablecreditsaleswhileminimizinglossesfrombaddebts.

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AccountsPayable:

[Link]
unts payable systems:

1. Preparechecksinpaymentofoutstandinginvoicesandproduce cashmanagementreports.
2. Helpensurepromptandaccuratepaymentofsupplierstomaintaingoodrelationships,ensureagoodcr
edit standing,and secureanydiscountsoffered forpromptpayment.
3. Providetight financialcontrol overall cashdisbursements ofthebusiness.
4. Providemanagementwithinformationneededfortheanalysisofpayments,expenses,purchases,em
ployeeexpense accounts, andcash requirements.

Payroll:

Payroll systems receive and maintain data from employee time cards and other work
[Link] systems:

1. Produce paychecks and other documents such as earning statements, payroll reports, and
laboranalysisreports
2. Arepreparedformanagementandgovernment agencies.
3. Help businesses make prompt and accurate payments to their employees, as well as reports
tomanagement, employees, and government agenciesconcerning earnings, taxes, and
otherdeductions.
4. Providemanagementwithreports analyzinglaborcostsandproductivity.

GeneralLedger:

Generalledgersystemsconsolidatedatafromaccountsreceivable,accountspayable,payroll,andothera
ccountinginformation systems. General ledgersystems:

1. Producetheperiodic financialstatementsand reportsofthebusiness.

2. Helpbusinessesaccomplishaccountingtasksinanaccurateandtimelymanner.
3. Typicallyprovidebetterfinancialcontrolsandmanagementreportsandinvolvefewerpersonneland
lower costs than manual accounting methods.

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 4.5. Manufacturinginformationsystem
A management information system that is targeted for use anywhere production is taking
[Link] management information systems are generally computerized and are designed to
collectandpresentthe data which managersneed in order to plan anddirect operations
withinthecompany.

Manufacturing information systems support the production/operations function, which

includesall activities concerned with the planning and control of the processes that produce
goods
[Link]/operationsfunctionisconcernedwiththemanagementoftheoperational
systems of all business [Link] planning and control information systems used foroperations
management and transaction processing support all firms that must plan, monitor,
andcontrolinventories, purchases, andtheflowof goods and services.

ComputerIntegratedManufacturing (CIM):

Activity

1. Whatistheroleofmanufacturinginformationsystemintheprocessofproduction?
2. How andwhattypesaninformationmanufacturinginformationsystemprovide?

Computer-based manufacturing information systems use several major techniques to

supportcomputer-integrated manufacturing (CIM).CIM is an overall concept that stresses that
thegoalsofcomputer useinfactoryautomation must be to:

 Simplify-
(reengineer)productionprocesses,productdesigns,andfactoryorganizationasavitalfoundation to
automaton and integration.
 Automate-
Productionprocessesandthebusinessfunctionsthatsupportthemwithcomputersandrobots.
 Integrate-Allproductionandsupportprocessesusingcomputersandtelecommunicationsnetworks.

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Overall goal of CIM: - Is to create flexible, agile, manufacturing processes that
efficientlyproductproducts of the highestquality. Thus, CIM supportstheconceptsof:

1. Flexiblemanufacturingsystems
2. Agilemanufacturing
3. Total qualitymanagement

Results of CIM: - Implementing such manufacturing concepts enables a company to

quicklyrespondto and fulfillcustomer requirements with high-qualityproducts and services.

Usesofcomputersinmanufacturinginclude:

1. Computer-aidedengineering(CAE)
2. Computer-aideddesign(CAD)
3. Computer-aidingprocessingplanning(CAPP)
4. Materialrequirementsplanning(MRP)
5. Manufacturingresource planning(MRP)
6. Computer-aidedmanufacturing(CAM)
Computer-aidedmanufacturing-(CAM)[Link]
example, this could be accomplished by monitoring and controlling the
productionprocessinafactory
throughmanufacturingexecutionsystems,orbydirectlycontrollingaphysical process (process
control), a machine tool (machine control), or machines with somehumanlikework capabilities
(robots).

Manufacturing execution systems - (MES) are performance monitoring information systems

forfactory floor [Link] monitor, track, and control the five essential components
involvedina production process:

1. Materials
2. Equipment
3. Personnel
4. Instructionsandspecifications
5. Productionfacilities.

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MESincludes:

1. Shopfloorschedulingandcontrolsystems
2. Machinecontrolsystems
3. Roboticscontrolsystems
4. Process control
systemsSomeofthebenefitsofCI
Mare:

1. Increasedefficiencythrough:

-worksimplification&automation,

-Betterproductionscheduleplanning

-Betterbalancingofproductionworkloads inproductioncapacity

2. Improvedutilizationoffacilities,higherproductivity, andbetterqualitycontrolthrough:

- Continuousmonitoring

- Feedbackandcontroloffactoryoperations,equipmentandrobots.

3. Reducedinvestmentsinproductioninventories&facilities

- worksimplification

- just-in-timeinventorypolicies

- betterplanningandcontrolof production

- betterplanningandcontroloffinishedgoodsrequirements

4. Improvedcustomerservice

- reducingout-of-stock situations

- producinghigh-qualityproducts thatbettermeet customerrequirements

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CollaborativeManufacturingNetworks:

Manufacturingprocesseslikecomputer-aidedengineeringanddesign,productioncontrol,production
scheduling, and procurement management typically involve a collaborative [Link],
this involves using the Internet, intranets, extranets, and other networks to link
[Link]
manufacturingnetworksmaylinkemployeeswithinacompany,orincluderepresentativesfromacomp
any‘s suppliersorcustomers wherever theymaybelocated.

ProcessControl:

Process control is the use of computers to control an ongoing physical [Link]

controlcomputersareusedto control physical processesin such areas as:

1. Petroleumrefineries [Link]

2. Cementplants [Link] papermills

3. Steelmills [Link] plants

4. Chemicalplants

MachineControl:

Machine control is the use of a computer to control the actions of a [Link] is

[Link]
trolapplication,thoughitalsoreferstothecontroloftypesettingmachines,weavingmachines,
andotherindustrial machinery.

Machinecontrolcomputersareusedinsuchareasas:

1. Factories

2. Industrialshops

3. Machinetoolingshops

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Robotics:

[Link]
boticsisthe technology ofbuildingandusing machines(robots)
withcomputerintelligenceandcomputercontrolledhumanlikephysicalcapabilities(dexterity,movem
ent,vision, and so on).

Robotsareusedas―steel-collarworkers‖toincreaseproductivityandcutscosts. Theyareused
insuchareas as:

1. Factories

2. Hazardousareasorworkactivities

Computer-AidedEngineering:

Manufacturingengineersusecomputer-
aidedengineering(CAE)tosimulate,analyze,andevaluatethemodelsofproductdesignstheyhavedeve
lopedusingcomputer-aideddesign(CAD)methods.

Networksofpowerfulengineeringworkstationswithenhancedgraphicsandcomputationalcapabilities
and CAD softwarehelp them:

1. Analyzeanddesignproductsandmanufacturingprocesses andfacilities.
2. Refineanengineer‘sinitialdrawingsandprovidethree-dimensionalcomputergraphicsthatcan
berotated to displayall sides ofthe object beingdesigned.
3. Zoominforclose-upviewsofaspecificpartandevenmakepartsoftheproductappeartomoveas
theywould in normal operation.
4. Designcanbeconverted intoafinishedmathematical modeloftheproduct.

4.6. TransactionProcessingSystem(TPS)
Transaction processing systems (TPS) are cross-functional information systems that
[Link]
g systemsinChapter 1asone ofthe major applicationcategoriesofinformationsystemsin business.

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Transactions are events that occur as part of doing business, such as sales, purchases,
deposits,withdrawals, refunds, and payments. Think, for example, of the data generated
whenever abusinesssellssomethingtoacustomeroncredit,whetherinaretailstoreoratane-
commercesiteonthe [Link]
aboutthecustomer,product,salesperson,store,[Link]
ptsadditionaltransactions,suchascreditchecks,customer billing, inventory changes, andincreases
in accounts receivable balances,
[Link],transactionprocessingactivitiesareneededtocaptureandprocess
such data, or the operations of a business would grind to a halt. Therefore,
transactionprocessingsystems playavitalrolein supporting thevital operations of mostcompanies
today.

Online transaction processing systems play a strategic role in Web-enabled business

processesand electronic commerce. Many firms are using the Internet and other networks that tie
themelectronically to their customers or suppliers for online transaction processing (OLTP).
Suchreal-time systems, which capture and process transactions immediately, can help firms
providesuperior service to customers and other trading partners. This capability adds value to
theirproducts and services and thusgives them an important way todifferentiate themselves
fromtheircompetitors.

[Link] ProcessingCycle

Transactionprocessingsystems,suchasSyntellect‘s,captureandprocessdatadescribingbusiness
transactions, update organizational databases, and produce a variety of
[Link] thisasatransaction processingcycleofseveral
basicactivities.

• Data Entry. The first step of the transaction processing cycle is the capture of business
[Link] example, transaction data may be collected by point-of-sale terminals using optical
scanningof bar codes and credit card readers at a retail store or other business. Or transaction
data can becaptured at an electronic commerce Web site on the Internet. The proper recording
and editing ofdatasothey arequicklyandcorrectly
capturedforprocessingisoneofthemajordesignchallengesof information systems.

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• Transaction Processing. Transaction processing systems process data in two basic ways:
(1)batch processing , where transaction data are accumulated over a period of time and
processedperiodically;and(2)real-timeprocessing(alsocalledonlineprocessing),wheredataare

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processedimmediatelyaftera transactionoccurs. Allonline transactionprocessing
systemsincorporatereal–
[Link] of fault tolerant
computer systems that can continue to operate even if parts of thesystemfail.

• Database Maintenance. An organization‘s databases must be maintained by its

transactionprocessingsystemssothattheyarealwayscorrectandup-to-
[Link],transactionprocessing systems update the corporate databases of an organization
to reflect changes resultingfrom day-to-day business transactions. For example, credit sales made
to customers will causecustomer account balances to be increased and the amount of inventory
on hand to be [Link] maintenance ensuresthatthese andother changesare
reflectedinthe data recordsstoredin thecompany‘sdatabases.

• Document and Report Generation. Transaction processing systems produce a variety

ofdocuments and reports. Examples of transaction documents include purchase orders,
paychecks,sales receipts, invoices, and customer statements. Transaction reports might take the
form of atransaction listing such as a payroll register or edit reports that describe errors detected
duringprocessing.

[Link],intranets,extran
ets,andWebbrowsersordatabasemanagementquerylanguagestomakeinquiries and receive
responses regarding the results of transaction processing activity. Typically,responses are
displayed in a variety of pre-specified formats or screens. For example, you
mightcheckonthestatusofa salesorder, thebalance inanaccount,or the amountof
stockininventoryand receive immediate responsesatyour PC.

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Summary

Functional Business Systems: Functional business information systems support the

businessfunctionsofmarketing,production/operations,accounting,finance,andhumanresourcemana
gementthroughavarietyofe-business operationaland managementinformationSystems.

Marketing: Marketing information systems support traditional and e-commerce processes

andmanagement of the marketing function. Major types of marketing information systems
includeinteractive marketing on e-commerce Web sites, sales force automation, customer
relationshipmanagement,salesmanagement,productmanagement,targetedmarketing,advertisingan
dpromotion, and market research. Thus, marketing information systems assist marketing
managersin electronic commerce product development and customer relationship decisions, as
well as inplanning advertising and sales promotion strategies and developing the e-commerce
potential ofnewand present products, and new channels of distribution.

Manufacturing: Computer-based manufacturing information systems help a company

achievecomputer integrated manufacturing (CIM) and thus simplify, automate, and integrate
many of theactivities needed to quickly produce high-quality products to meet changing
customer [Link] example, computer-aided design using collaborative manufacturing
networks helps engineerscollaborate on the design of new products and processes. Then
manufacturing resource
[Link],manufacturin
g execution systems monitor and control the manufacture of products on the factoryfloor through
shop floor scheduling and control systems, controlling a physical process (processcontrol), a
machine tool (numerical control), or machines with some humanlike work capabilities(robotics).

Human Resource Management: Human resource information systems support human

resourcemanagement in organizations. They include information systems for staffing the
organization,training and development, and compensation administration. HRM Web sites on the
Internet
orcorporateintranetshavebecomeimportanttoolsforprovidingHRservicestopresentandprospectivee
mployees.
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Accounting and Finance: Accounting information systems record, report, and analyze
[Link]
ng systems: order processing, inventory control, accounts receivable, accounts
payable,payroll,[Link]
ding the financing of a business and the allocation of financial resources within a
[Link] information systems include cash management, online investment
management, capitalbudgeting,andfinancialforecastingand planning.

Cross-Functional Enterprise Systems: These applications include integrated cross-

functionalenterprisesystemssuchasenterpriseresourceplanning(ERP),customerrelationshipmanage
ment(CRM),andsupplychainmanagement(SCM).Theseapplicationsmaybeinterconnected by
enterprise application integration (EAI) systems so that business professionalscan more easily
access the information resources they need to support the demands of customers,suppliers, and
business partners. Enterprise collaboration systems (ECS) are cross-
functionalsystemsthatsupportandenhancecommunicationandcollaborationamongtheteamsandwor
kgroupsin an organization.

Transaction Processing Systems: Online transaction processing systems play a vital role
inbusiness. Transaction processing involves the basic activities of (1) data entry, (2)
transactionprocessing,(3)databasemaintenance,(4)documentandreportgeneration,and(5)inquirypr
ocessing. Many firms are using the Internet, intranets, extranets, and other networks for
onlinetransactionprocessingtoprovidesuperiorservicetotheircustomers and suppliers.

SelfTestQuestions
MultipleChoices
1. ADSSthatuses geographicdatabasestoconstruct anddisplaymaps
A. Geographicinformationsystem
B. Datavisualizationsystems
C. Marketingandsalesanalysis
D. Databasemarketing

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 2. A typeofbusinesssoftware usedtoinput,accumulate, track andanalyzefinancial andaccountingdata.
A. Financialinformationsystem
B. Marketinginformationsystem
C. Manufacturinginformationsystem
D. Alloftheabove
3. A type of financial information system that can handle a business with between 10 to
100employees and revenue between $10to $50million
A. AccountingSoftware
B. Mid-market
C. High-end
D. Vertical
4. Asysteminwhich marketingdata filesare organizedd stored.
A. Userinterfaces
B. Applicationssoftware
C. Marketingdatabases
D. Systemssupport
5. Whichoneofthefollowingis trueaboutthe useof HRIS?
A. Attitudesurveyresults
B. Restructuringcosting
C. Applicanttracking
D. Alloftheabove
6. Fromthefollowingoneisnottrueabout the benefitofDSS.
A. Directaccesstoinformation
B. Informationwhenyouwantit
C. Inabilitytomakecomparisons
D. Freedomfromtime consumingtasks

101|Page
SayTrue/False
1. MarketingInformationSystemsacombinationofcomputerhardwareandapplicationsoftwarewhichprov
idefinancialdata and analysis.
2. StrategyImplementationprovidessupportforproductlaunches,enablesthecoordinationofmarketingstra
tegies,andisan integral partof sales force automation
3. TPS is a computerized system that performs and records the daily routine transactions necessary
toconduct the business.
4. Batchprocessingisthefirmcollectsdatafromtransactionsastheyoccur,placingthemingroupsor batches.
5. Datastorage–Alteringdatabasestoreflectthetransaction.

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 CHAPTERFIVEKNOWLEDG
EMANAGEMENTSYSTEMS
ChapterObjectives
Attheend of thischapter,studentswillbe ableto:
Definethetermknowledgemanagement
Describethetheoryofknowledgemanagement
Explain theKMsharing
ExplainthetechnologytosupportKM
EvaluateKMapplicationsinanorganizations 

5. Introduction
WeintroducedknowledgemanagementsystemsinChapter2astheuseofinformationtechnology to
help gather, organize, and share business knowledge within an organization. Inmany
organizations, hypermedia databases at corporate intranet Web sites have become
[Link]
takes the form of best practices, policies, and business solutions at the project, team,business
unit, and enterprise levels of the company. For many companies, enterprise informationportals
are the entry to corporate intranets that serve as their knowledge management
[Link]‘[Link],enterpris
e knowledge portals play an essential role in helping companies use their intranets asknowledge
management systems to share and disseminate knowledge in support of businessdecision
makingbymanagers and business professionals.

5.1. DefinitionOfKnowledgeManagementAndSystem

Making personal knowledge available to others is the central activity of the knowledge
[Link]
nthas thusbecome oneof themajor strategicuses ofinformation technology.

Knowledge Management (KM) is the process of gathering, managing and sharing

employees'knowledge capital throughout the organization. Knowledge sharing throughout the
organizationenhancesexistingorganizationalbusinessprocesses,introducesmoreefficientandeffecti

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ve

104|Page
[Link] and
integrated approach to the creation, capture, organization access and use of
anenterprise'sknowledgeassets.

KM has now become a mainstream priority for companies of all sizes. Specific
knowledgemanagement activities help focus on organization on acquiring, storing and utilizing
knowledgefor problem solving, dynamic leaning, strategic planning and decision making. It also
preventsintellectual assets from decay, adds to firm intelligence and provides increased
[Link] isnot only about Knowledge Technology. KM must be an enabler to achieve
strategic [Link] debris from failedattemptsto

Impose new technical infrastructures that are either inappropriate to their work environments,
[Link]
Management initiative arises to become solution for such problems, which
bringstogetherpeople,processand technologyand helpscorporatetoachieveits goalsandvision.

Knowledge management is an audit of "intellectual assets" that highlights unique

sources,critical functions and potential bottlenecks, which hinder knowledge flows to the point of
use. Itprotects intellectual assets from decay, seeks opportunities to enhance decisions, services
andproductsthrough addingintelligence, increasingvalue and providingflexibility.
KM complements and enhances other organizational initiatives such as total quality
management(TQM), business process re-engineering (BPR) and organizational learning,
providing a new andUrgentfocus to sustain competitive position.
Manycompaniesarebuildingknowledgemanagementsystems(KMS)tomanageorganizational
learning and business know-how. The goal of such systems is to help
knowledgeworkerscreate,organize,andmakeavailableimportantbusinessknowledge,whereverandw
heneverit‘[Link],procedures,patents,
reference works, formulas, best practices, forecasts, and fixes. Groupware, data
mining,knowledge bases, and online discussion groups are some of the key technologies that
may beusedbyaKMS.
Knowledge management systems also facilitate organizational learning and knowledge
[Link],encouragebehavior

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changes by employees, and significantly improve business performance. As the
organizationallearning process continues and its knowledgebase expands, the knowledge-
creating
companyworkstointegrateitsknowledgeintroitsbusinessprocesses,products,[Link]
ation helps the company become a more innovative and agile provider of high-qualityproducts
and customer services, as well as a formidable competitor in the market place. Manycompanies
today can only realize lasting competitive advantage if they become knowledge-creating
companies or learning organizations. That means consistently creating new
businessknowledge,disseminating itwidely throughoutthe company,andquickly building the
newknowledgeinto theirproducts and services.
Whywestudy KM?

• The basic economic resource - the means of productionis no longer capital,nor

naturalresources,nor [Link] is andwill beknowledge.
• ―Themostvaluableassetof a21stcenturyinstitution, whetherbusiness or non-business,will beits
knowledgeworkersand theirproductivity."
• Mostofourworkisinformationbased.
• Organizationscompeteonthebasisofknowledge.
• Productsand services are increasinglycomplex, endowingthem with
asignificantinformationcomponent.
• Theneedforlife-longlearningisan inescapablereality.
• Ithelpsfirmslearnfrom pastmistakesandsuccesses.
• Itbetter exploitsexistingknowledgeassets byre-deployingthemin areaswherethe
firmstandsto gain something,
• Itenhancesthefirm's abilitytoinnovate
RoleofKnowledgemanagementforbusiness
• Increasepeopleskillsandexpertisethroughsharing
• Facilitatescollaboration intheinnovationprocess
• Assistin convertingtacit knowledgeto explicitknowledge
• helpcompanies toturn humancapital into intellectualcapital bycreatingvalues
• Providesnecessaryelementsto solvecritical problems

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 ManagementInformationSystem

5.2. TYPESOFKNOWLEDGE

Activity

1. Whatarethedifferencebetweenexplicitknowledge,andtacit knowledge
2. Discusesaboutthesourceofexplicitknowledge,andtacitknowledgeandhowanorganizationc
anmanagethose two types of knowledge

Knowledge-creating companies exploit two kinds of knowledge. One is explicit

knowledge,which is the data, documents, and things written down or stored on computers. The
other kind istacit knowledge, of knowledge, which resides in workers. Tacit knowledge can often
representsome of the most important information within an [Link]-time employees of
acompanyoften ―know‖manythingsabout how to manufacture a product, deliver the service,
dealwith aparticular vendor,or operate anessentialpieceofequipment.

Thistacitknowledgeisnotrecordedorcodifiedanywherebecauseithasevolvedintheemployee‘s mind
through years of experience. Furthermore, much of this tacit knowledge isnever shared with
anyone who might be in a position to record it in a more formal way becausethereis often
littleincentive to do soor simply, ―Nobodyeverasked.‖

1. TACITKNOWLEDGE

Tacit knowledge is personal. It is stored in the heads of people. It is accumulated through

studyand [Link] isdeveloped through theprocess of interaction with other people.
Tacitknowledgegrows through thepractice of trialand error and the experience of
successandfailure. Tacit knowledge, therefore, is context-specific. It is difficult to formalize,
record, orarticulate. It includes subjective insights, intuitions and conjectures. As intuitive
knowledge, it isdifficultto communicateandarticulate.

Since tacit knowledge is highly individualized, the degree and facility by which it can be
shareddepends to a great extent on the ability and willingness of the person possessing it to
convey it [Link]

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 ManagementInformationSystem

[Link]
deconversations,workshops,[Link], among others, the
use of information technology tools such as email, groupware, instantmessagingand related
technologies

.In managing tacit knowledge, the very first hurdle to most organizations is identifying the
tacitknowledge that is useful to the organization. Once relevant tacit knowledge is identified,
itbecomes extremely valuable to the organization possessing it because it is a unique asset that
isdifficult for other organizations to replicate. This very characteristic of being unique and hard
toreplicate is what makes tacit knowledge a basis of the organization‘s competitive
[Link],itisessentialforanorganizationtodiscover,propagateandutilizethetacitknow
ledge of its employees in order to optimize the use of its own intellectual capital. In
anyorganization, tacit knowledge is the essential prerequisite for making good decisions. A
newexecutive not yet familiar with the organization will find it difficult to make good decisions
sincehe or she has yet to acquire tacit knowledge about the workings of the organization.
Tacitknowledge is therefore crucial to getting things done and creating value for
[Link] is the essenceof the―learningorganization‖.

Managementandemployeesneedtolearnandinternalizerelevantknowledgethroughexperience and
action. And they need to generate new knowledge through personal and groupinteractionswithin
theorganization.

2. EXPLICITKNOWLEDGE

Explicit knowledge iscodified. It is stored in documents,databases, websites, emails and thelike.

It is knowledge that can be readily made available to others and transmitted or shared in
theformof systematicandformallanguages.

Explicit knowledge comprises anything that can be codified, documented and archived.
Theseinclude knowledge assets such as reports, memos, business plans, drawings, patents,
trademarks,customer lists, methodologies, and the like. They represent an accumulation of the
organization‘sexperiencekeptinaformthatcanreadilybeaccessedbyinterestedpartiesandreplicatedif

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 ManagementInformationSystem

desired. In many organizations these knowledge assets are stored with the help of computers
andinformationtechnology.

Explicit knowledge is not completely separate from tacit knowledge. On the other hand, the
twoare mutually complementary. Without tacit knowledge it will be difficult, if not impossible,
[Link],apersonwithouttechnical,mathematicalorscientifickn
owledge(tacit knowledge) will have greatdifficultyunderstandingahighlycomplex

mathematicalformulationorchemicalprocessflowdiagram,althoughitmaybereadilyavailable from
the organization‘s library or databases (explicit knowledge).And unless we try toconvert tacit
knowledge to explicit knowledge, wecannot reflectupon it, study and discuss it,and share it
within the organization – since it will remain hidden and inaccessible inside the headofthe person
that has it.

5.3. KEYTERMSANDCONCEPTS' INKNOWLEDGEMANAGEMENT

Activity

[Link]
knowledgemanagementactivitiesand how they can bemanaged

 KnowledgeCreation.
 KnowledgeRetention
 KnowledgeUtilization
 KnowledgeTransfer

There are those who believe that it is impossible to truly manage knowledge, only
[Link] individuals examine business processes, events and activities, they also tend to
use abehavioral focus as the organizing framework. Accordingly, most people find that behaviors
arethe most comfortable frame of reference for understanding the relationships between
businessprocesses and knowledge flows. Knowledge flows comprise the set of processes, events
andactivities through whichdata, information, knowledge and meta-knowledge are
transformedfrom one state to another. To simplify the analysis of knowledge flows, the
framework describedbasedprimarilyon the General KnowledgeModel.

The model organizes knowledge flows into four primary activity areas: knowledge
creation,retention,transfer and utilization.

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 ManagementInformationSystem

Knowledge Creation. This comprises activities associated with the entry of new knowledge
intothesystem, and includesknowledgedevelopment, discoveryandcapture.

Knowledge Retention. This includes allactivities that preserve knowledge and allow ittoremain
in the system once introduced. It also includes those activities that maintain the
viabilityofknowledgewithin thesystem.

Knowledge [Link] refers to activities associated with the flow of knowledge from
[Link],translation, conversion,filtering andrendering.

Knowledge [Link] includes the activities and events connected with theapplication
ofknowledgeto business processes.

KnowledgeArtifacts

Artifacts come in a variety of forms, including documents, files, papers, conversations,

pictures,thoughts, software, databases, e-mail messages, data sets, winks and nods, and whatever
else canbe used to represent meaning and understanding. Said another way: knowledge artifacts
flowamong and form the linkages between the activities and events that comprise knowledge
[Link] people‘sinvolvementwith aknowledgestream isthroughvarious artifacts.

Artifacts are what we deal with every day. We write reports, send e-mail, read books,
rememberbitsandpieces of oldthoughts, engagein conversationsandfollow procedures.

Thetermknowledgeartifactdoesnotspecifytheformoftheartifact([Link],transformation,
metadata or meta-knowledge) but it is very specific as to the process that gaverise to the artifact.
This makes the term valuable for explaining such things as the importance
ofknowledgeartifactretention,[Link]
ifferfromoneanotherinseveralways:theirformofcodification,thewayinwhichtheyare
rendered,theirdegreeofabstraction and theirabilitytoenableactionsand decisions.

Knowledge artifacts also vary in their degree of articulation; simple knowledge artifacts can
beexplicit, implicit or tacit. Most artifacts, however, are not simple but complex, and contain
acombinationofexplicit, implicit andtacit components.

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 ManagementInformationSystem

ExplicitKnowledgeArtifacts:Theseareknowledge artifactsthathavebeenarticulated

in such a way that they can be directly and completely transferred from one person to
[Link] normally means that they have been codified so it is possible to touch, see, hear,
feel andmanipulate them (e.g. books, reports, data files, newsreels, audio cassette sand other
physicalforms).

Implicit Knowledge Artifacts: These are knowledge artifacts whose meaning is not
explicitlycaptured, but can be inferred; in effect, the codification process is incomplete. Explicit
[Link]
retained knowledge. For example, the knowledge that a given phrase is a book
[Link]
book title, as might be the case in an SGML or XML system when <Book Title> tags
explicitlycommunicate semantic meaning. In most cases, the reader infers the meaning of the
words fromtheir position (on the cover of a book), formatting (big, bold and centered)and content
(lackingformalsubject and predicate).

TacitKnowledgeArtifacts:[Link]
eferredtotacitknowledgeas―knowingmorethanwecansay‖(Polanyi1966). simply stated, tacit
artifacts are those that defy expression and codification. This is not to say thattacitknowledge
artifactsare withoutinfluence. The mostvivid exampleisthe oldsaw aboutwhat would happen to
the centipede if she were to stop and think about how to walk. It isimportant to note that, for the
most part, artifacts are passive. While they can change (or, moreaccurately, be changed), they
can‘t act. Has anybody ever seen a financial? Report makes adecisionorabook on aerodynamics
build anairplane?

5.4. TECHNOLOGYTOOLSFORKNOWLEDGEMANAGEMENT

Knowledge Management technology is a broad concept, encompassing much more than

Notesand the Web. Firms can apply a wide variety of technologies to the objectives of
managingKnowledge, some of which have been available for many years. The promise of
technologiesaimed at Knowledge Management is that they will help organizations use their
knowledge [Link]

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technologicaltoolscurrentlyclassifiedasKMapplicationsmaybegroupedundertheheadingsCollabora
tion,content managementand businessintelligence.

Collaborativetools:

 Groupware(i.e. LotusNotes)
 Meetingsupportsystems([Link],dataconferencing,videoconferencing,e-
brainstorming)
 Knowledgedirectories([Link])
 Extranet(customer/suppliercommunication)
 Intranet(intra-organizationcommunication)

Contentmanagement:

 Internet/WWW([Link])
 Documentmanagementsystems(i.e. e-filing)
 Agentsandfilters([Link])
 Officeautomationsystems([Link],digitalimageprocessing)
 Electronicpublishingsystems

Businessintelligence:

Datawarehousing([Link])W
orkflow([Link])
(Group)decisionsupportsystems([Link],executiveinformationsyste
ms)
Knowledgebasesystems([Link],expertsystems)E-
commerce([Link]/WWW, e-tailing)

5.5. KNOWLEGDESHARING

Knowledge management involves the panoply of procedures and techniques used to get the
mostfrom an organization‘s tacit and codified know-how (Teece, 2000). While defined in
manydifferent ways, knowledge management generally refers to how organizations create, retain,
andshareknowledge(Argote, 1999; Huber 1991).
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knowledge sharing is seen as occurring through a dynamic learning process where

organizationscontinuallyinteract withcustomers and suppliers to innovateor creativelyimitate.

The study of knowledge sharing, which is the means by which an organization obtains access
toitsownandotherorganizations‘knowledge,hasemergedasakeyresearchareafromabroadanddeepfie
ldofstudyontechnologytransferandinnovation,andmorerecentlyfromthefieldofstrategicmanagemen
[Link],knowledge-
[Link],experienceandresearchsu
ggestthatsuccessfulknowledgesharinginvolvesextendedlearningprocessesratherthansimplecommu
nicationprocesses,asideasrelatedtodevelopmentandinnovationneedtobemadelocallyapplicablewith
the adaptation being done by the ‗incumbent firms‘ (Nelson & Rosenberg, 1993) or ‗thelocal
doers of development‘ (Stiglitz, 1999) for the ideas to be successfully implemented. Theliterature
identifies five primary contexts thatcanaffect such successful knowledge-
sharingimplementations, including the relationship between the source and the recipient, the
form andlocationoftheknowledge,therecipient‘slearningpredisposition,thesource‘sknowledge-
sharingcapability, and thebroaderenvironment inwhich the sharingoccurs.

A synthesis of this research suggests three types of knowledge-sharing activities to be

[Link], analyses of the form and the location of the knowledge are important because
each canaffect the types of sharing processes that will be necessary as well as how challenging
[Link],thetypesofagreements,rulesofengagementandmanagerialpractices
adopted by the parties are important to evaluate in that they can shape both the flows
ofresourcesandknowledgebetweenthepartiesandtheactionstakentoovercomeandaccommodatesigni
[Link],thespecificknowledge-sharing activities used
are important in that they are the means through which thepartiesseek to facilitate
knowledgesharing.

Whypeople donotwantto shareknowledge?

• Knowledgeispower‖ • ―Iwant to do thingsmyway‖
• ―Idon‘t havetime‖ • ―This ishow it‘s alwaysbeen done‖
• ―That‘s not myjob‖ • ―I‘m alreadysufferingfrom
• ―You‘rejustusingother people‘s informationoverload‖
ideasandtakingthecredit‖

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• ―You shouldalreadyknowall the • ―What‘s in it forme?‖

answers‖
• ―It‘s just anothermanagement fad; if
Iignoreit,it‘lleventuallygoaway‖

Knowledgearchitecture

• Knowledgearchitecturecanbere
gardedasaprerequisitetoknowle
dgesharing. People Technology
• The infrastructurecanbeviewedas
a combinationof
Context
people,content,andtechnology.

• Thesecomponentsare
inseparableandinterdependent

11.26

Thepeoplecore
• knowledgeworkers,managers,customers,andsuppliers.
• Helpstoflowinformationtherightinformationattherighttime

TheTechnicalCore
• Theobjective- enhancecommunicationaswellasensureeffectiveknowledgesharing.
– Technology provides a lot of opportunities for managing tacit knowledge in
theareaof communication.
– Communicationnetworks createlinks betweennecessarydatabases.
• refertothetotalityofthe
requiredhardware,software,andthespecializedhumanresources.
• Attributes;Accuracy,speed,reliability,security,andintegrity
Thecontentcore(User InterfaceLayer
• Usuallya web browser represents theinterfacebetween theuser andthe KM system.
• Topplayerinknowledge architecture
• provideawayforthe proper flow oftacit and explicit knowledge
• Featurewhiledeigninguserinterface

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- Consistency
- Relevancy
- Visual clarity
- Usability
- EaseofNavigation

Summary

The value of a firm‘s products and services is based not only on its physical resources but also
onintangible knowledge assets. Some firms perform better than others because they have
betterknowledge about how to create, produce, and deliver products and services. This firm
knowledgeis difficult to imitate, unique, and can be leveraged into long-term strategic benefit.
Knowledgemanagement systems collect all relevant knowledge and experience in the firm and
make itavailable wherever and whenever it is needed to support business processes and
managementdecisions. They also link the firm to external sources of knowledge. Knowledge
managementsystems support processes for acquiring, storing, distributing, and applying
knowledge, aswellas processes for creating new knowledge and integrating it into the
organization. They includeenterprise-wide systems for managing and distributing documents,
graphics, and other digitalknowledge objects, systems for creating corporate knowledge
directories of
employeeswithspecialareasofexpertise,officesystemsfordistributingknowledgeandinformation,an
dknowledgework systemsto facilitate knowledge creation.

Knowledge-creating companies exploit two kinds of knowledge. One is explicit

knowledge,which is the data, documents, and things written down or stored on computers. The
other kind istacit knowledge, of knowledge, which resides in workers. Tacit knowledge can often
representsomeofthe most important informationwithin an organization

Thestudyof knowledge sharing,whichis themeansbywhichanorganization obtainsaccesstoits

own and other organizations‘ knowledge, has emerged as a key research area from a broadand
deep field of study on technology transfer and innovation, and more recently from the fieldof
strategic management. Increasingly, knowledge-sharing research has moved to
anorganizationallearningperspective.

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SelfTestQuestions
MultipleChoices
1. Thefirst stepofknowledgemanagement systemcycleis;
A. Store
B. Capture
C. Create
D. Disseminate
2. Whichoneofthefollowingis/aretrueaboutaimsofknowledgemanagementinitiatives;
A. Makeknowledgevisible
B. Developknowledgeintensiveculture
C. Buildknowledgeinfrastructure
D. None oftheabove
3. Knowledgemanagementinvolves all ofthefollowingexcept;
A. Creationofknowledge
B. disseminationofknowledge
C. utilizationofknowledge
D. None oftheabove
4. Oneistrue about Knowledge managementsystems,except;
A. Useoftechnologiestomanageknowledge
B. Usedwithturnover,change,downsizing
C. Provideconsistentlevels ofservice
D. None oftheabove.
5. Aknowledgecreatedbyindividualsnotaboutindividuals.
A. Ontological
B. Epistemological
C. Tacit
D. Explicit
SayTrue/False
1. Tacit isatypeof knowledgeexistsinpeople’s heads,not articulatedordocumented.
2. Explicitisatypeofknowledgecanbeprocessedbyinformationsystemscodifiedandrecordedandarchiveda
ndprotected.
3. Knowledgeistheprocess throughwhichorganizationsgeneratevaluefromtheirintellectualpropertyand
knowledge-based assets.

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CHAPTERSIX
SECURITYANDETHICALCHALLENGES
Chapterobjectives
Aftercompletingthischapter,studentswill beableto:
 Definethetermethical andsecurityissuesinIS
 DescribeISthreats
 Explainaboutcomputer viruses
 ExplaintechnologiesusedtoprotectISthreats

Introduction
There is no question that the use of information technology in business presents major
securitychallenges, poses serious ethical questions, and affects society in significant ways.
Therefore, inthis section, we explore the threats to businesses and individuals as a result of many
types ofcomputer crime and unethical behavior. In Section II, we will examine a variety of
methods thatcompaniesuse to managethe securityand integrityoftheir business systems.

6.1. Business/ITSecurity,Ethics,andSociety
Activity

1. WhatisbusinessITSecurity?
2. Discusesaboutthetypesofcomputercrimeandunethicalbehavior
3. ListtheMethodsthatcompaniesusetomanagethesecurityandintegrityoftheirbusinesssystems.

The use of information technologies inbusiness has had a major impact on society and
thusraisesethicalissuesintheareasofcrime,privacy,individuality,employment,health,andworkingco
nditions.

It is important to understand that information technology has had beneficial results, as well
asdetrimental effects, on society and people in each of these areas. For example, computerizing
amanufacturing process may have the beneficialresult of improving working conditions
andproducingproductsofhigherqualityatlowercost,butitalsohastheadverseeffectof

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eliminating people‘s jobs. So your job as a manager or business professional should

involvemanaging your work activities and those of others to minimize the detrimental effects of
[Link]
entan ethicallyresponsible useof information technology.

6.1.1 EthicalResponsibilityofBusinessProfessionals
As a business professional, you have a responsibility to promote ethical uses of
informationtechnology in the workplace. Whether or not you have managerial responsibilities,
you shouldaccept the ethical responsibilities that come with your work activities. That includes
properlyperforming your role as a vital human resource in the business systems you help develop
and useinyour organization. As a manager or business professional, it will be your responsibility
tomake decisions about business activities and the use of information technologies that may
haveanethical dimension thatmust be considered.
For example, should you electronically monitor your employees‘ work activities and e-
mail?Should you let employees use their work computers for private business or take home
copies ofsoftware for their personal use? Should you electronically access your employees‘
personnelrecords or workstation files? Should you sell customer information extracted from
transactionprocessing systems to other companies? These are a few examples of the types of
decisions youwill have to make that have an ethical dimension. So let‘s take a closer look at
several ethicalfoundationsin business and information technology.

BusinessEthics
Business ethics is concerned with the numerous ethical questions that managers must confront
aspart of their daily business decision making. For example, the Figure below outlines some of
thebasiccategoriesofethicalissuesandspecificbusinesspracticesthathaveseriousethicalconsequence
s. Notice that the issues of intellectual property rights, customer and employeeprivacy, security
of company records, and workplace safety are highlighted because they havebeenmajorareas of
ethical controversyin information technology.
How can managers make ethical decisions when confronted with business issues such as
thoselisted in Figure below? Several important alternatives based on theories of corporate
[Link],inbusinessethics,thestockholdertheoryholdsthat

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managers are agents of the stockholders, and their only ethical responsibility is to increase
theprofitsof thebusinesswithout violatingthelaw or engaginginfraudulent practices.

Figure6.1:BusinessEthics

However, the social contract theory states that companies have ethical responsibilities to
allmembers of society, which allows corporations to exist according to a social contract. The
firstcondition of the contract requires companies to enhance the economic satisfaction of
[Link]
urces, misusing political power, or subjecting their employees to dehumanizing
workingconditions. The second condition requires companies to avoid fraudulent practices, show
respectfor their employees as human beings, and avoid practices that systematically worsen the
positionof any group in society. The stakeholder theory of business ethics maintains that
managers havean ethical responsibility to manage a firm for the benefit of all its stakeholders,
that is, allindividuals and groups that have a stake in, or claim on, a company. These stakeholders
usuallyincludethecorporation‘sstockholders,employees,customers,suppliers,andthelocalcommuni
[Link]

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bythecorporation,suchascompetitors,governmentagencies,andspecial-
[Link] of conflictingstakeholders is obviouslynot an easytask
formanagers.
TechnologyEthics
Another important ethical dimension deals specifically with the ethics of the use of any form
oftechnology. These principles can serve as basic ethical requirements that companies should
meetto help ensure the ethical implementation of information technologies and information
systems inbusiness. One common example of technology ethics involves some of the health risks
of usingcomputer workstations for extended periods inhigh-volume dataentry job positions.
Manyorganizations display ethical behavior by scheduling work breaks and limiting the exposure
ofdata entry workers to staring at a computer monitor to minimize their risk of developing a
varietyofwork-related health disorders, suchas hand oreye injuries.

EthicalGuidelines
We have outlined a few ethical principles that can serve as the basis for ethical conduct
bymanagers, end users, and IS professionals. But what more specific guidelines might help
yourethical use of information technology? Many companies and organizations answer that
questiontodaywith detailed policies forethical computer andInternetusagebytheir employees.
Forexample,mostpoliciesspecifythatcompanycomputerworkstationsandnetworksarecompany
resources that must be used only for work related uses, whether using internal networksor the
Internet. Another way to answer this question is to examine statements of
responsibilitiescontained in codes of professional conduct for IS professionals. A good example
is the code ofprofessional conduct of the Association of Information Technology Professionals
(AITP), anorganization of professionals in the computing field. Its code of conduct outlines the
[Link]
eprofessionalby(1)actingwithintegrity,(2)increasingyourprofessionalcompetence, (3) setting
high standards of personal performance, (4) accepting responsibility foryour work, and (5)
advancing the health, privacy, and general welfare of the public. Then youwould be
demonstrating ethical conduct, avoiding computer crime, and increasing the security
ofanyinformation systemyou develop or use.

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Table6.1:AITPstandardsofprofessionalconduct

Part of the AITP standards of professional conduct. This code can serve as a model for
ethicalconductbybusiness endusers as well asIS professionals.

6.2. ComputerCrime
CybercrimeisbecomingoneoftheNet‘[Link],criminalsaredoingeverything from
stealing intellectual property and committing fraud to unleashing viruses andcommittingacts of
cyberterrorism.

Computer crime, a growing threat to society, is caused by the criminal or irresponsible actions
ofindividuals who are taking advantage of the widespread use and vulnerability of computers
andthe Internet and other networks. It presents a major challenge to the ethical use of
informationtechnologies. Computer crime also poses serious threats to the integrity, safety, and
survival ofmost business systems and thus makes the development of effective security methods
a toppriority.

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Computer crime is defined by the Association of Information Technology Professionals

(AITP)asincluding(1)theunauthorizeduse,access,modification,anddestructionofhardware,software
,data,ornetworkresources;(2)theunauthorizedreleaseofinformation;(3)theunauthorized copying of
software; (4) denying an end user access to his or her own hardware,software, data, or network
resources; and (5) using or conspiring to use computer or networkresources to obtain information
or tangible property illegally. Thisdefinition was promoted bytheAITP in aModel
ComputerCrimeAct and isreflectedin manycomputercrimelaws.

HackingandCracking
Cyber thieves have at their fingertips a dozen dangerous tools, from ―scans‖that ferret out
weaknesses in Web site softwareprograms to ―sniffers‖that snatch passwords.

Hacking,incomputerizes,istheobsessiveuseofcomputersortheunauthorizedaccessanduseof
networked computer systems. Hackers can be outsiders or company employees who use
theInternet and other networks to steal or damage data and programs. One of the issues in
hacking iswhat to do about a hacker who commits only electronic breaking and entering, that is,
gets accessto a computer system and reads some files but neither steals nor damages anything.
This situationis common in computer crime cases that are prosecuted. In most cases, courts have
found that thetypical computer crime statute language prohibiting malicious access to a computer
system didapplyto anyonegainingunauthorized access to another‘s computer networks.

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Table6.2:Commonhackingtactics

Hackers can monitor e-mail, Web server access, or file transfers to extract passwords,
stealnetwork files, or plant data that will cause a system to welcome intruders. A hacker may also
useremote services that allow one computer on a network to execute programs on another
computerto gain privileged access within a network. Telnet, an Internet tool for interactive use of
remotecomputers,[Link]
oaccessacomputer‘se-mailport,forexample,tomonitore-
mailmessagesforpasswordsandotherinformationaboutprivilegeduseraccountsandnetworkresource
[Link] just some of the typical types of computer crimes that hackers commit on the Internet
on [Link]‘swhyInternetsecuritymeasureslikeencryptionandfirewalls,asdiscussed

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in the next section, are so vital to the success of e-commerce and other e-business
[Link] hacking community is quick to make the distinction between hacking and
cracking.
Acracker(alsocalledablackhatordarksidehacker)[Link] seldom
used outside of the security industry and by some modern programmers. The generalpublic uses
the term hacker to refer to the same thing. In computer jargon, the meaning of hackercan be
much more broad. The name comes from the opposite of white hat hackers. Usually acracker is a
person who maintains knowledge of the vulnerabilities he or she finds and exploitsthem for
private advantage, not revealing them to either thegeneral public or the manufacturerfor
correction. Many crackers promote individual freedom and accessibility over privacy
andsecurity. Crackers may seek to expand holes in systems; any attempts made to patch software
aregenerally to prevent others from also compromising a system over which they have
[Link],acrackermay
worktocausedamagemaliciouslyor makethreats to do so forblackmailpurposes.

The term cracker was coined by Richard Stallman to provide an alternative to abusing
[Link]‘suseislimited(asis―blackhat‖)mostlyto some
areas of the computer and security field and, even there, is considered controversial.
[Link],and
more common usage, refers to people who attempt to gain unauthorized access to
computersystems. Many members of the first group attempt to convince people that intruders
should becalledcrackers ratherthanhackers, but the common usageremains ingrained.

CyberTheft
Many computer crimes involve the theft of money. In the majority of cases, they are inside
jobsthat involve unauthorized network entry and fraudulent alteration of computer databases to
coverthe tracks of the employees involved. Of course, many computer crimes involve the use of
theInternet. One early example was the theft of $11 million from Citibank in late 1994.
Russianhacker Vladimir Levin and his accomplices in St. Petersburg used the Internet for an
electronicbreak-in of Citibank‘s mainframe systems in New York. They then succeeded in
transferring thefunds from several Citibank accounts to their own accounts at banks in Finland,
Israel, andCalifornia. In most cases, the scope of such financial losses is much larger than the
[Link]‘tusuallyrevealthattheyhavebeentargetsorvictimsofcomputer
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crime. They fear scaring customers and provoking complaints by shareholders. In fact,
severalBritish banks, including the Bank of London, paid hackers more than a half million
dollars not torevealinformation aboutelectronicbreak-ins.

Cyberterrorism
Cyber terrorism is the leveraging of organizations or government‘s computers and
information,particularlyviatheInternet,tocausephysical,real-
[Link]
ofhackingorinformation warfare. They disagree with labeling it terrorism because of the
unlikelihood of thecreation of fear, significant physical harm, or death in a population using
electronic
means,[Link]
tures (NCSL) puts a much finer point on the definition of the term: the use of
informationtechnology by terrorist groups and individuals to further their agenda. This can
include use ofinformation technology to organize and execute attacks against networks,
computer systems
andtelecommunicationsinfrastructures,orforexchanginginformationormakingthreatselectronically
.
Cyber terrorism can have a serious large-scale influence on significant numbers of people. It
cansignificantly weaken a country‘s economy, thereby denying it access to vital resources
[Link]-basedbusinesses.
Like bricks and mortar retailers and service providers, most Web sites that produceincome
(whether by advertising, monetary exchange for goods, or paid services) could stand tolose
money in the event of downtime created by cyber criminals. As Internet-businesses
haveincreasingeconomicimportancetocountries,whatisnormallycybercrimebecomesmorepolitical
andtherefore―terror‖[Link],therehavebeennoreportedcyberattacksonthe
[Link],however,beenseverallarge-scaleexamplesofcyberterrorisminother
countries. One such example occurred in Romania when cyber terrorists illegally gainedaccess to
the computers controlling the life-support systems at an Antarctic research
station,[Link],theculpritswerestoppedbeforedamageactual
ly occurred. Mostly nonpolitical acts of sabotage have caused financial and other damage,as in a
case where a disgruntled employee caused the release of untreated sewage into water

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inMaroochy Shire, Australia. Computer viruses have degraded or shut down some
nonessentialsystemsinnuclear power plants, butthis isnot believedto havebeen adeliberateattack.

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More recently, in May 2007 Estonia was subjected to a mass cyber attack in the wake of
theremoval of a Russian World War II war memorial from downtown Talinn. The attack was
adistributeddenialofserviceattackinwhichselectedsiteswerebombardedwithtrafficinorderto force
them off-line; nearly all Estonian government ministry networks as well as two
majorEstonianbanknetworkswere knockedoff-line;inaddition, the politicalparty Website
ofEstonia‘s current Prime Minister Andrus Ansip featured a counterfeit letter of apology
[Link] by
the Russian government, Estonia‘s defense minister admitted he had no
[Link]
―unfounded,‖andneitherNATOnorEuropeanCommissionexpertswereabletofindanyproof of
official Russian government participation. In January 2008 a man from Estonia was
convictedforlaunchingtheattacksagainst theEstonian Reform PartyWeb site andfined.

UnauthorizedUseat Work
The unauthorized use of computer systems and networks can be called time and resource theft.
Acommon example is unauthorized use of company-owned computer networksby
[Link] use may range from doing private consulting or personal finances to playing
video games tounauthorized use of the Internet on company networks. Network monitoring
software, calledsniffers, is frequently used to monitor network traffic to evaluate network
capacity, as well as torevealevidenceof improper use.
According to one survey, 90 percent of U.S. workers admit to surfing recreational sites
duringoffice hours, and 84 percent say they send personal e-mail from work. So this kind of
activityalone may not get you fired from your job; however, other Internet activities at work can
[Link],The NewYorkTimesfired23workersbecause they
weredistributing racist and sexually offensive jokes on the company‘s e-mail system. Xerox
[Link] more than 40 workers for spending up to eight hours a day on pornography sites on
theWeb. Several employees even downloaded pornographic videos, which took so much
networkbandwidththatitchokedthecompanynetworkandpreventedcoworkersfromsendingorreceivi
ng e-mail. Xerox instituted an eight member SWAT team on computer abuse that usessoftware to
review every Web site its 40,000 computer user‘s view each day. Other companiesclamp down
even harder by installing software like Surf Watch, which enables them to block
andmonitoraccess to off-limit Web sites.

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Table6.3: Internet abusesintheworkplace

SoftwarePiracy
Computer programs are valuable property and thus the subject of theft from computer
[Link], unauthorized copying of software, or software piracy , is also a major form of
softwaretheft. Software piracy by company employees is widespread, which has resulted in
lawsuits bythe Software Publishers Association, an industry association of software developers,
[Link]
s illegal because software is intellectual property that is protected by copyright law and
[Link],intheUnitedStates,commercialsoftwarepackagesare

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protectedbytheComputerSoftwarePiracyandCounterfeitingAmendmenttotheFederalCopyright
Act. In most cases, the purchase of a commercial software package is really a paymentto license
its fair use by an individual end user. Therefore, many companies sign site licenses thatlegally
allow them to make a certain number of copies for use by their employees at a particularlocation.
Other alternatives are shareware, which allows you to make copies of software
forothers,andpublicdomain software,which isnot copyrighted.

The most recent study by the Business Software Alliance, an antipiracy group whose
membersincludeAppleComputer,IBM,Intel,andMicrosoft,showsthatin2007,piratedsoftwareaccou
nts for 38 percent of software in use worldwide. Reported losses from software piracy
in2007werealmost$48billion—up$8billionfromthe yearbefore.―That‘soverathirdofthe industry‘s
revenue,‖ says Bob Kruger, the group‘s vice president for enforcement. According tothe findings,
only $50 billion of the $100 billion in software purchased in 2007 was legallyacquired. In other
words, for every dollar spent on software purchased legitimately
worldwide,therewas50cents‘worth of softwarethatwasobtained illegally.

TheftofIntellectualProperty
Software is not the only property that is subject to computer-based piracy. Other
intellectualproperty theft occurs in the form of infringements of copyrighted material, such as
music,
videos,images,articles,books,andotherwrittenworks,[Link]
d versions can easily be captured by computer systems and made available for people toaccessor
downloadatInternetWebsitesor canbe readily disseminated by e-mailasfileattachments. The
development of peer-to-peer (P2P) networking technologies has made digitalversions of
copyrighted material even more vulnerable to unauthorized use. For example, P2Pfile-sharing
software enables direct MP3 audio file transfers of specified tracks of music betweenyour PC
and those of other users on the Internet. Thus, such software creates a peer-to-peernetwork of
millions of Internet users who electronically trade digital versions of copyrighted orpublic
domain music stored on their PC‘s hard drives. More recently, music publishers
andmanufacturers are offering legal, and relatively inexpensive, methods to access online music
in avariety of formats. Because of this proactive posture, the music industry reports that
[Link]‘s

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look at the ongoing debate in this controversial area more closely with a real-world example
thatemphasizesthe threat of developments inITto intellectual propertyrights.

ComputerVirusesandWorms
One of the most destructive examples of computer crime involves the creation of a
computervirus or worm. Virus is the more popular term, but technically, a virus is a program
code thatcannot work without being inserted into another program. A worm is a distinct program
that [Link],theseprogramscopy
annoyingordestructiveroutinesintothenetworked computer systems of anyone who accesses
computers infected with the virus or whouses copies of magnetic disks taken from infected
computers. Thus, a computer virus or wormcan spread destruction among many users. Although
they sometimes display only humorousmessages,theymoreoften destroythecontents ofmemory,
hard disks, andotherstoragedevices.

Computer viruses typically enter a computer system through e-mail and file attachments via
[Link]
software downloaded from the Internet can be another source of viruses. A virususually copies
itself into the files of a computer‘s operating system. Then the virus spreads to themain memory
and copies itself onto the computer‘s hard disk and any inserted floppy disks.
Thevirusspreadstoothercomputersthroughe-mail,filetransfers,othertelecommunicationsactivities,
or floppy disks from infected computers. Thus, as a good practice, you should
[Link]
use antivirus programs that can help diagnose and remove computer viruses
frominfectedfilesonyour [Link].

Adwareand Spyware
Two more recent entries into the computer vulnerabilities arena are adware and spyware.
Bydefinition, adware is software that, while purporting to serve some useful function and
oftenfulfilling that function, also allows Internet advertisers to display advertisements as banners
andpop-up ads without the consent of the computer user. In the extreme, adware can also
collectinformation about the user of its host computer and send it over the Internet to its owner.
Thisspecial class of adware is called spyware and is defined as any software that employs
users‘Internet connection in the background without their knowledge or explicit permission.

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Spywareprogramscollectspecificinformationaboutyou,rangingfromgeneraldemographicslikename
,

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address,andInternetsurfinghabitstocreditcard,SocialSecuritynumber,usernames,passwords,or
other [Link] are spyware.
Proper adware represents a viable, albeit sometimes irritating, revenuemodel for many software
companies that allows you to get products for free and, when usedcorrectly, does not pose any
significant privacy threat. In contrast, spyware is and should beconsidered a clear threat to your
privacy. Whereas proper adware generally allows the computeruser to opt in to its use in
exchange for free use of a piece of software, spyware operates under aratherbizarreethical model.
Consider thefollowing:
• You illegally enter a bank‘s computer system and place a stealth piece of software in
[Link] orcaught,you mightbeprosecutedandmaygoto jail.
• You write a worm or virus and spread it around the Internet or other networks. If you
aredetected or caught,youmight be prosecuted and may go to jail. Youwrite aprogram thatspreads
a spyware agent across computer systems connected to the Internet that steals the
privateinformation of the users it infects, manipulates their Internet experience, and uses other
people‘sWeb sites and browsers to display your advertising. If you are detected or caught, you
may getrich, you don‘t go to jail, and the computer users are left with possibly rebuilding their
computersystem to get rid of your spyware. Spyware has a variety of characteristics, beyond its
potentialfor stealing valuable private information, which make it undesirable to most computer
users. Atthe very least, it plagues the user of the infected machine with unwanted advertising.
More often,it watches everything a user does online and sends that information back to the
marketingcompany that created the spyware. Often, spyware applications add advertising links to
Webpages owned by other people, for which the Web page owner does not get paid, and may
evenredirect the payments from legitimateaffiliate-fee advertisersto the makers of the
[Link] undesirable characteristics include setting an infected system‘s browser home
page andsearch settings to point to the spyware owner‘s Web sites (generally loaded with
advertising),often in a manner that prevents you from changing back the settings (referred to as
home-pagehijacking). In the extremes, spyware can make a dial-up modem continually call
premium-ratephone numbers, thus causing large telephone charges (and usually fees to the
spyware owner) orleavesecurityholesinaninfectedsystemallowingthemakersofthespyware—
or,inparticularly bad cases, anyone at all—to download and run software on the infected
machine(suchdownloadsarecalledTrojans).Inalmostallcases,spywareseverelydegradessystem

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performance. Asyou can see, spyware doesn‘t have any redeeming features except for thebenefits
to its owner. Its use is pervasive, and failing to protect against it virtually ensures thatyour
system will eventually become infected. Protecting against adware and spyware
generallyrequires the purchase and installation of one of a variety of programs designed to
prevent thesoftware from being downloaded and installed. Once a computer is infected, however,
removalprogramsareoften not completelysuccessful in eliminatingthe nuisance.

PrivacyIssues
Informationtechnologymakesittechnicallyandeconomicallyfeasibletocollect,store,integrate,
interchange, and retrieve data and information quickly and easily. This
characteristichasanimportantbeneficialeffectontheefficiencyandeffectivenessofcomputer-
basedinformation systems. The power of information technology to store and retrieve
information,however, can have a negative effect on the right to privacy of every individual. For
example,confidentiale-
[Link] is being
collected about individuals every time they visit a site on the World WideWeb. Confidential
information on individuals contained in centralized computer databases bycredit bureaus,
government agencies, and private business firms has been stolen or misused,resulting in the
invasion of privacy, fraud, and other injustices. The unauthorized use of
[Link]
hurt the credit standing or reputation of an individual. Governments around the world,but none
more than in the United States, are debating privacy issues and considering variousforms of
legislation. With regard to theInternet,opt-in versus opt-out is central to the
[Link]-
instandard,making privacy the default. An opt-in system automatically protects consumers who
do notspecifically allow data to be compiled about them. Most business interests back opt-out,
arguingitdoesn‘[Link],currentlawsinthisregarddifferbetween
the United States and Europe. In the United States, opt-out is the default
position,whereasinEurope,consumersmustopt-inor theirinformationcannotbe used.
Additionalprivacyissues under debate include:
• Accessingprivatee-mailconversationsandcomputerrecordsandcollectingandsharinginformation
about individuals gained from their visits to Internet Web sites and

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newsgroups(violationofprivacy).

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• Alwaysknowingwhereapersonis,especiallyasmobileandpagingservicesbecomemorecloselyassoc
iated with people ratherthan places (computer monitoring).
• Usingcustomerinformationgainedfrommanysourcestomarketadditionalbusinessservices(comput
ermatching).
• Collectingtelephonenumbers,e-
mailaddresses,creditcardnumbers,andotherpersonalinformationto buildindividual customer
profiles(unauthorized personal files).

PrivacyonInternet
If you don‘t take the proper precautions, any time you send an e-mail, access a Web site, post
amessage to a newsgroup, or use the Internet for banking and shopping . . . whether you‘re
onlinefor business or pleasure, you‘re vulnerable to anyone bent on collecting data about you
withoutyour knowledge. Fortunately, by using tools like encryption and anonymous remailers—
and bybeing selective about the sites you visit and the information you provide—you can
minimize, ifnotcompletelyeliminate, therisk ofyour privacybeingviolated.

The Internet is notorious for giving its users a feeling of anonymity when in reality they
arehighly visible and open to violations of their privacy. Most of the Internet and its World
WideWeb, e-mail, chat, and newsgroups are still a wide open, unsecured electronic frontier, with
notough rules on what information is personal and private. Information about Internet users
iscaptured legitimately and automatically each time you visit a Web site or newsgroup and
isrecorded as a ―cookie file‖on your hard disk. Then theWeb site owners or online auditing
services like Double Click may sell the information from cookie files and other records of
yourInternet use to third parties. To make matters worse, much of the Net and Web is an easy
targetfor the interception or theft by hackers of private information furnished to Web sites by
Internetusers. Of course, you can protect your privacy in several ways. For example, sensitive e-
mail canbe protected by encryption, if both e-mail parties use compatible encryption software
built intotheir e-mail programs. Newsgroup postings can be made privately by sending them
throughanonymous remailers that protect your identity when you add your comments to a
[Link] can ask your Internet service provider not to sell your name and personal
information tomailing list providers and other marketers. Finally, you can decline to reveal
personal data
andinterestsononlineserviceandWebsiteuserprofilestolimityourexposuretoelectronicsnooping.
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ComputerMatching
Computerprofilingandmistakesinthecomputermatchingofpersonaldataareothercontroversial
threats to privacy. Individuals have been mistakenly arrested and jailed and peoplehave been
denied credit because their physical profiles or personal data have been used byprofiling software
to match them incorrectly or improperly with the wrong individuals. Anotherthreat is the
unauthorized matching of computerized information about you extracted from
thedatabasesofsalestransactionprocessingsystemsandsoldtoinformationbrokersorothercompanies.
A more recent threat is the unauthorized matching and sale of information about youcollected
from Internet Web sites and newsgroups you visit, as we discussed previously. You arethen
subjected to a barrage of unsolicited promotional material and sales contacts as well
ashavingyour privacyviolated.

PrivacyLaws
Many countries strictly regulate the collection and use of personal data by business
corporationsand government agencies. Many government privacy laws attempt to enforce the
privacy ofcomputer-based files and communications. For example, in the United States, the
ElectronicCommunications Privacy Act and the Computer Fraud and Abuse Act prohibit
intercepting datacommunications messages, stealing or destroying data, or trespassing in federal-
related computersystems. Because the Internet includes federal-related computer systems,
privacy attorneys arguethat the laws also require notifying employees if a company intends to
monitor Internet [Link] example is the U.S. Computer Matching and Privacy Act, which
regulates the matchingofdata held in federal agencyfiles to verifyeligibilityfor federal programs.
More recently, new legislation intended to protect individual privacy has created some
[Link]-Oxley,theHealthInsurancePortabilityandAccountability
Act (HIPAA), Gramm-Leach-Bliley, the USA PATRIOTAct, the CaliforniaSecurity Breach
Law, and Securities and Exchange Commission rule 17a-4 are but a few of thecompliance
challenges facing organizations. In an effort to comply with these new privacy laws,it is
estimated that a typical company will spend 3–4 percent of its IT budget on
[Link] HealthInsurancePortability andAccountability
Act(HIPAA)[Link]
sa wide variety of issues related to individual health insurance. Two important sections of
[Link]

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create safeguards against the unauthorized use, disclosure, or distribution of an

individual‘shealth-related information without their specific consent or authorization. While the
privacy rulespertain to all ProtectedHealthInformation(PHI) including paper and electronic, the
securityrules deal specifically with Electronic Protected Health Information (EPHI). These rules
lay
outthreetypesofsecuritysafeguardsrequiredforcompliance:administrative,physical,andtechnical.
For each of these types, the rules identify various security standards, and for
eachstandard,[Link]
[Link] specifications
are more flexible. Individual covered entities can evaluate their ownsituationand determinethe
best wayto implement addressablespecifications.

6.3. ToolsofSecurityManagement
The goal of security management is the accuracy, integrity, and safety of all information
systemprocesses and resources. Thus, effective security management can minimize errors, fraud,
andlossesintheinformationsystemsthatinterconnecttoday‘scompaniesandtheircustomers,suppliers,
and other stakeholders. Security management is a complex task. As you can see,security
managers must acquire and integrate a variety of security tools and methods to protect
acompany‘s information system resources. We discuss many of these security measures in
thissection.

InternetworkedSecurityDefenses
Few professionals today face greater challenges than those IT managers who are
[Link]
heneedforInternetsecurityandInternetaccess?ArethebudgetsforInternetsecurityadequate?Whatimpa
ctwillintranet,extranet,andWebapplicationdevelopmenthaveonsecurityarchitectures?Howcantheyco
meupwithbestpracticesfordevelopingInternetsecuritypolicy?Thesecurityoftoday‘snetworkedbusine
[Link]
ectedtotheWebandtheInternetfore-
commerceandarereengineeringtheirinternalbusinessprocesseswithintranets,e-
businesssoftware,andextranetlinkstocustomers,suppliers,[Link]
ksandbusinessflowsneedtobeprotectedfromexternalattackbycybercriminalsandfromsubversionbyth
[Link]
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[Link]‘stakealook
at someof theseimportant securitydefenses.

Encryption
Encryption of data has become an important way to protect data and other computer
networkresources, especially on the Internet, intranets, and extranets. Passwords, messages, files,
andother data can be transmitted in scrambled form and unscrambled by computer systems
forauthorized users only. Encryption involves using special mathematical algorithms, or keys,
totransform digital data into a scrambled code before they are transmitted, and then to decode
thedata when they are received. The most widely used encryption method uses a pair of public
andprivate keys unique to each individual. For example, e-mail could be scrambled and
encodedusing a unique public key for the recipient that is known to the sender. After the e-mail
istransmitted, only the recipient‘s secret private key could unscramble the message.
Encryptionprograms are sold as separate products or built into other software used for the
encryptionprocess. There are several competing software encryption standards, but the top two
are RSA (byRSAData Security) and PGP(which standsfor ―pretty good privacy‖), a popular
encryption program available on the Internet. Software products including Microsoft Windows
XP, NovellNetWare,andLotusNotesoffer encryptionfeatures usingRSAsoftware.

Firewalls
Another important method for control and security on the Internet and other networks is the
useof firewall computers and software. A network firewall can be a communications
processor,typically a router, or a dedicated server, along with firewall software. A firewall serves
as agatekeepersystemthatprotectsacompany‘sintranetsandothercomputernetworksfromintrusion
by providing a filter and safe transfer point for access to and from the Internet and
othernetworks. It screens all network traffic for proper passwords or other security codes and
onlyallows authorized transmissions in and out of the network. Firewall software has also
become anessential computer system component for individuals connecting to the Internet with
DSL orcable modems because of their vulnerable, ―always-on‖ connection status.

Internet/intranetfirewallsystem
Firewalls can deter, but not completely prevent, unauthorized access (hacking) into
[Link],afirewallmayallowaccessonlyfromtrustedlocationsontheInternet

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toparticularcomputersinsidethefirewall,oritmayallowonly―safe‖[Link] example, a
firewall may permit users to read e-mail from remote locations but not run certainprograms. In
other cases, it is impossible to distinguish the safe use of a particular
networkservicefromunsafeuse,[Link]
s for some network services (such as e-mail or file transfers) that perform most of
thesamefunctions but arenot as vulnerable to penetration.

Denialof ServiceAttacks
Majorattacksagainste-
commerceandcorporateWebsitesinthepastfewyearshavedemonstratedthattheInternetisextremelyv
ulnerabletoavarietyofassaultsbycriminalhackers, especially distributed denial of service (DDOS)
[Link] steps organizations cantake to protect themselves from DDOS attacks. Denial of
service assaults via the Internet dependon three layers of networked computer systems: (1) the
victim‘s Web site, (2) the
victim‘sInternetserviceprovider(ISP),and(3)thesitesof―zombie‖orslavecomputersthatthecyber
criminals commandeered. For example, in early 2000, hackers broke into hundreds of
servers,mostly poorly protected servers at universities, and planted Trojan [Link] programs,
whichwerethenused tolaunchabarrageofservicerequests ina concertedattackone-commerce
WebsiteslikeYahoo!andeBay.

E-mailMonitoring
Spotchecksjustaren‘[Link]
ee-mailtrafficusingcontent-
monitoringsoftwarethatscansfortroublesomewordsthatmightcompromisecorporate
[Link]:Users of monitoringsoftwaresaidthey‘reconcerned about protecting their
intellectual property and guarding themselves against [Link]-
mailsystemsareoneofthefavoriteavenuesofattackbyhackersforspreadingcomputervirusesorbreakingi
ntonetworkedcomputers.E-
mailisalsothebattlegroundforattemptsbycompaniestoenforcepoliciesagainstillegal,personal,ordama
gingmessages by employees versus the demands of some employees and others who see such
policiesasviolations of privacyrights.

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VirusDefenses

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Is your PC protected from the latest viruses, worms, Trojan horses, and other malicious
programsthat can wreak havoc on your PC? Chances are it is, if it‘s periodically linked to the
corporatenetwork. These days, corporate antivirus protection is a centralized function of
informationtechnology. Someone installs it for you on your PC and notebook or, increasingly,
distributes itover the network. The antivirus software runs in the background, popping up every
so often toreassureyou. Thetrend rightnow is to automatetheprocessentirely.

Manycompaniesarebuildingdefensesagainstthespreadofvirusesbycentralizingthedistribution and
updating of antivirus software as a responsibility of their IS departments. Othercompanies are
outsourcing the virus protection responsibility to theirInternet service providersor
telecommunications or security management companies. One reason for this trend is that
themajor antivirus software companies like McAfee (VirusScan) and Symantec (Norton
Antivirus)have developed network versions of their programs, which they are marketing to ISPs
and othersas a service they should offer to all their customers. The antivirus companies are also
marketingsecurity
suitesofsoftwarethatintegratevirusprotectionwithfirewalls,Websecurity,andcontentblocking
features.

SecurityCodes
Typically, a multilevel password system is used for security management. First, an end user
logson to the computer system by entering his or her unique identification code, or user ID.
Second,the end user is asked to enter a password to gain access into the system. (Passwords
should bechanged frequently and consist of unusual combinations of upperand lowercase letters
andnumbers.) Third, to access an individual file, a unique file name must be entered. In
somesystems, the password to read the contents of a file isdifferent from that required to write to
afile (change its contents). This feature adds another level of protection to stored data
[Link] even stricter security, however,passwordscan be scrambled, or encrypted, toavoid
theirtheft or improper use. In addition, smart cards, which contain microprocessors that
generaterandomnumbersto addto anend user‘spassword,areusedin somesecuresystems.

BackupFiles
Backupfiles,whichare duplicate files of data or programs,are another important securitymeasure.
Files can also be protected by file retention measures that involve storing copies of

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[Link],thefilesfrompreviousperiodscanbeused

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to reconstruct new current files. Sometimes, several generations of files are kept for
controlpurposes. Thus, master files from several recent periods of processing (known as child,
parent,and grandparent files) may be kept for backup purposes. Such files may be stored off-
premises,that is, in a location away from a company‘s data center, sometimes in special storage
vaults inremotelocations.

Summary
Ethical and Societal Dimensions: The vital role of information technologies and systems
insocietyraisesseriousethicalandsocietalissuesintermsoftheirimpactonemployment,individuality,w
orkingconditions, privacy, health,and computer crime.
Employment issues include the loss of jobs—a result of computerization and automation
ofwork—versus the jobs created to supply and support new informationtechnologies and
thebusiness applications they make possible. The impact on working conditions involves the
issuesof computer monitoring of employees and the quality of the working conditions of the jobs
thatuse information technologies heavily. The effectof ITon individuality addresses the
issuesofthedepersonalization,
regimentation,andinflexibilityofsomecomputerizedbusinesssystems.
Employees‘ heavy use of computer workstations for long periods raises issues about and
maycause work-related health disorders. Theuse ofIT to accessor collect private
informationwithoutauthorization,aswellasforcomputerprofiling,computermatching,computermoni
toring, and computer libel and censorship, raises serious privacy issues. Computer
crimeissuessurroundactivitiessuchashacking,computervirusesandworms,cybertheft,unauthorizedu
seatwork,softwarepiracy,[Link],business professionals, and
IS specialists can help solve the problems of improper use of IT byassuming their ethical
responsibilities for the ergonomic design, beneficial use, and
enlightenedmanagementofinformation technologies in our society.
EthicalResponsibilityinBusiness:BusinessandITactivitiesinvolvemanyethicalconsiderations.
Basic principles of technology and business ethics can serve as guidelines forbusiness
professionals when dealing with ethical business issues that may arise in the widespreaduse of
information technology in business and society. Examples include theories of corporatesocial
responsibility, which outline the ethical responsibility of management and employees to
acompany‘sstockholders,stakeholders, andsociety.
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Security Management: One of the most important responsibilities of the management of

acompany is to ensure the security and quality of its IT-enabled business activities.
Securitymanagement tools and policies can ensure the accuracy, integrity, and safety of the
informationsystems and resources of a company and thus minimize errors, fraud, and security
losses in
[Link]
inessdata,firewalls,e-mailmonitoring,antivirussoftware,securitycodes,backup files, security
monitors, biometric security measures, computer failure controls, fault-tolerant systems, disaster
recovery measures, information system controls, and security audits ofbusinesssystems.
SelfTestQuestions
MultipleChoices
1. InformationsystemsethicsthatdealswithProtectingone’spersonalinformation;
A. ComputerLiteracy
B. Privacy
C. DigitalDivide
D. Identitytheft
2. isanyillegal actforwhichknowledgeofcomputertechnologyisusedtocommittheoffense.

A. Fraud
B. Intrusions
C. Extortion
D. Error
3. isstealingofanother’ssocialsecuritynumber,creditcardnumber,orotherpersonalinformation.
A. ComputerLiteracy
B. ComputerEthics
C. Privacy
D. Identitytheft
4. Whichoneofthefollowingistrueabout information accuracy?
A. Dealswithwhoowninformationaboutindividualsandhowinformationcanbesoldandexchanged.
B. Dealswithauthentication/verificationandfidelity/reliabilityofinformation.

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C. Dealswithwhatinformationapersonhastherighttoobtainaboutothersandhowtheinformation can
beused.
D. None oftheabove

5. areduplicatefilesof dataorprograms.

A. Virusdefenses
B. Securitycodes
C. Backupfiles
D. All of the above

SayTrue/False
1. Information property is deals with who own information about individuals and how information
canbe sold andexchanged.
2. ComputerSecurityisprecautionstakentokeepcomputersandtheinformationtheycontainsafefromunauth
orized access
3. Encryptionistheprocessofencodingmessagesbeforetheyenterthenetworkorairwaves,thendecodingthe
m atthe receiving end ofthetransfer.
4. Firewallishardwareandsoftwaredesignedtokeepunauthorized usersoutof networksystems
5. Informationmanipulationcanoccuratvirtuallyanystageofinformationprocessingfrominputtooutput.

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