Information System

Overview
Principles and Learning
Objectives
•–Discuss why it is important to study and understand
information systems
•–Distinguish data from information and describe the
characteristics used to evaluate the value of data
•–Name the components of an information system and describe
several system characteristics
•–List the components of a computer-based information system
•–Identify the basic types of business information systems and
discuss who uses them, how they are used, and what kinds of
benefits they deliver
Why Learn about Information
Systems?
•Information system (IS):
• A set of interrelated components that collect,
manipulate, and disseminate data and information and
provide feedback to meet an objective
•Businesses:
• Can use information systems to increase revenues and
reduce costs
•Information systems used by:
• Sales representatives
• Managers
• Financial advisors
What is an
Information System?

An organized combination
of people, hardware,
software, communications
networks, and data
resources that collects
data, transforms it, and
disseminates information.
 Information System(IS):

An • The other definition can be “IS is a

Introducti combination of IT and people's
on to an activities using technology to
Informatio support business processes,
operations, management, and
n Systems decision-making at different levels
(IS) of the organization.”
Componen
ts of an IS
Components of an IS
1. Hardware : Physical devices and equipment like computers,
servers, storage, and networking devices.
2. Software: Programs and applications used for data processing,
such as enterprise resource planning (ERP) systems, operating
systems, or productivity tools.
3. People: Any person involved in developing, operating, and using an
IS. Eg. Analysts, Programmers, Help desk operators, and End-users.
4. Procedures: Documentation containing directions on how to use
other components of an IS. Eg. Operation manual, and User manual.
5. Network: Communication systems that connect hardware and
software, enabling the exchange of data and resources within and
between organizations.
6. Data: Raw or unorganized facts and figures that describes
conditions, ideas, or objects. Eg. Invoices, orders, payments,
customer details, etc.
 Questions

1. What is IS ? What is its Role in Decision Making?

2. What are the best practices for summarizing
sales data to present a sales strategy?
3. How can businesses leverage summarized
inventory data for efficient supply chain
management?
4. How can companies leverage summarized
financial data to optimize investment and cost
management?
 DIKW
Primary goal of IS is to economically process data into info or
knowledge.
Data: Raw unorganized facts. Data describe products,
customers, events, activities, and transactions that are
recorded, classified, and stored.
Information: Information is data that have been processed,
organized, or put into the context so that they have meaning
and value to the person receiving them.
It provides "who", "what", "where", and "when" in context of
given data.
•Defining and organizing relationships among data creates
information.
DIKW

• Knowledge: It adds understanding, experience, accumulated

learning, and expertise to information, as they apply to a current
problem or activity.
• It is used to answer the question "how" and is fact of knowing
something with familiarity gained through experience or education.
• 2 types:
• Explicit Knowledge: Basic form of knowledge, easy to
communicate, store, and distribute. Eg. Books, manuals, policies and
procedures, etc.
• Tacit Knowledge: It is not taught; it is learned by doing, watching
and experiencing. Eg. Hands-on skills, specialized know-how,
employee experiences, etc.
DIKW

•Wisdom: Wisdom is the ability to apply

knowledge and experience to make
sound judgments and navigate life
effectively.
•It's about more than just possessing
information; it's about understanding
how to use that information to make
wise decisions.
DIKW
DIKW
Case Study

• A national retail chain, XYZ Retail, was

facing challenges in predicting sales
trends and managing inventory
efficiently. The company decided to use
a data-driven decision-making approach
to improve sales performance and
inventory control.
 DIKW
• Data (Raw Facts & Figures)
• XYZ Retail collects vast amounts of raw sales and
inventory data, including:
• Daily sales transactions from all stores
• Stock levels across warehouses
• Customer purchase histories
• Seasonal demand fluctuations
• Supplier restock frequencies
• At this stage, the data is raw and unprocessed,
stored in databases without any meaningful insights.
 DIKW
• Information (Processed Data for Meaning)
• To convert data into information, XYZ Retail applies data
analytics:
• Sales Reports: Organizes sales data by product, location,
and time period
• Inventory Levels: Shows how stock levels fluctuate over
time
• Customer Insights: Identifies popular products and peak
sales hours
• For example, a report may indicate that "Product A sells
30% more on weekends than weekdays." While this
information is useful, it does not yet suggest direct business
actions.
 DIKW
• Knowledge (Insights & Patterns)
• At this stage, XYZ Retail derives actionable insights from
the information:
• Trend Analysis: Sales of winter clothing peak in
November and December, prompting early stock
preparation.
• Customer Preferences: Customers in urban stores
prefer premium brands, while rural stores sell more
budget-friendly alternatives.
• Seasonal Demand Planning: During holiday sales,
some items sell 50% faster, requiring increased stock
levels.
• Now, patterns emerge, helping managers make
informed decisions on inventory, promotions, and pricing.
 DIKW
• Wisdom (Strategic Decision-Making)
• Finally, XYZ Retail applies wisdom by making strategic and
proactive business decisions based on knowledge:
• Automated Replenishment: The system predicts future
stock requirements based on past sales trends and
automatically adjusts inventory orders.
• Targeted Promotions: The company creates personalized
offers, such as sending discount coupons for winter
clothing in early November based on prior buying behavior.
• Optimized Pricing Strategy: Prices are adjusted dynamically
—increasing during high demand and lowering when
inventory needs clearing.
• These decisions maximize revenue, minimize stockouts,
and reduce overstocking, leading to higher profitability
and improved customer satisfaction.
 CASE STUDY
•A large hospital, ABC Medical Center, faced a
major issue with patient readmissions due to
chronic diseases such as heart failure and
diabetes.
•High readmission rates not only increased
healthcare costs but also reduced the quality
of patient care.
•The hospital decided to implement a data-
driven approach using the DIKW (Data,
Information, Knowledge, Wisdom) model to
predict and reduce readmissions.
 DIKW
1. Data
• Gather patient data from electronic health
records (EHRs), including medical history,
lab results, medications, and demographic
information.
• Collect real-time data from wearable
devices and patient monitoring systems.
• Ensure data quality and consistency by
cleaning and preprocessing the data.

06/27/2025 21
 DIKW
2. Information
• Analyze data to identify patterns and
correlations, such as common factors
leading to readmissions.
• Segment patients based on risk levels (e.g.,
high, medium, low) for readmission.
• Develop dashboards and reports to
visualize key metrics like readmission rates
and patient risk scores.

06/27/2025 22
 DIKW
3. Knowledge
• Use machine learning models to predict the
likelihood of readmission for individual
patients.
• Identify root causes of readmissions, such
as medication non-adherence or lack of
follow-up care.
• Develop protocols and guidelines for
managing high-risk patients.

06/27/2025 23
 DIKW
4. Wisdom
• Implement targeted interventions for high-
risk patients, such as personalized care
plans, remote monitoring, and patient
education programs.
• Train healthcare providers on best practices
for reducing readmissions.
• Continuously monitor and refine the system
based on feedback and outcomes.

06/27/2025 24
Simple Problems on DIKW

•A logistics company tracks 750,000 delivery

records in a month. After processing the data, they
identify 75,000 unique delivery routes. Later, they
develop 12 different optimization strategies to
improve delivery efficiency. Finally, they implement
these strategies to reduce delivery times by 20%.
•Identify which numbers correspond to Data,
Information, Knowledge, and Wisdom in the
DIKW hierarchy.
•Solution:
•Data: The 750,000 delivery records collected in a
month.
•Information: The 75,000 unique delivery routes
identified after processing.
•Knowledge: The 12 different optimization strategies
developed to improve delivery efficiency.
•Wisdom: Implementing the strategies to achieve a
20% reduction in delivery times.
•Problem 2
•A financial institution collects 1,500,000 transaction logs
in a quarter. After data cleaning and analysis, they
identify 150,000 fraudulent transaction patterns.
Subsequently, they create 25 different fraud detection
algorithms. Finally, they use these algorithms to reduce
fraud incidents by 30%.
•Identify which numbers correspond to
Data, Information, Knowledge, and Wisdom
in the DIKW hierarchy.
•Solution:
•Data: The 1,500,000 transaction logs collected in a
quarter.
•Information: The 150,000 fraudulent transaction
patterns identified after data cleaning and analysis.
•Knowledge: The 25 different fraud detection
algorithms created based on the analysis.
•Wisdom: Using the algorithms to achieve a 30%
reduction in fraud incidents.
The Characteristics of Valuable Information

•If an organization’s information is not

accurate or complete:
• People can make poor decisions, costing
thousands, or even millions, of dollars
Directly linked to how it helps decision
makers achieve their organization’s goals
•Valuable information:
• Can help people and their organizations
perform tasks more efficiently and
effectively
System Concepts

•System:
• Set of elements or components that interact to
accomplish goals
•Components of a system:
• Inputs
• Processing mechanisms
• Outputs
• Feedback
System ConceptsCONTINUED
System Performance and Standards

•Efficiency:
• Measure of what is produced divided by what is
consumed
•Effectiveness:
• Measure of the extent to which a system attains its
goals
•System performance standard:
• Specific objective of the system
System Performance and
StandardsCONTINUED
System Performance and
StandardsCONTINUED
Information System Revisited

•Information system (IS) is a set of interrelated

elements that:
• Collect (input)
• Manipulate (process)
• Store
• Disseminate (output) data and information
• Provide a corrective reaction (feedback mechanism)
to meet an objective
Information System RevisitedCONTINUED
 Input, Processing, Output, Feedback

•Input:
• Activity of gathering and capturing raw data
•Processing:
• Converting data into useful outputs
•Output:
• Production of useful information, usually in the form
of documents and reports
•Feedback:
• Information from the system that is used to make
changes to input or processing activities
 Manual and Computerized
Information Systems

•Manual Information System

• Example: Paper-Based Inventory Management
• Description: In a small retail store, inventory management might be done
manually using paper records. The store owner keeps track of stock levels,
sales, and orders by writing them down in a ledger or on inventory sheets.
• Process: When a product is sold, the owner manually updates the inventory
sheet to reflect the new stock level. Orders for new stock are also recorded
manually.
• Advantages: Simple to set up, no need for technical skills or equipment.
• Disadvantages: Time-consuming, prone to human error, difficult to scale.
 Manual and Computerized
Information SystemsCONTINUED

•Computerized Information System

• Example: Point of Sale (POS) System
• Description: In a larger retail store, inventory management is handled using
a computerized POS system. This system records sales transactions, updates
inventory levels in real-time, and generates reports.
• Tools: Software like Square, Shopify POS, or custom-built POS systems.
• Process: When a product is sold, the POS system automatically updates the
inventory database, processes the payment, and prints a receipt. The system
can also generate sales reports and reorder alerts.
• Advantages: Efficient, accurate, scalable, provides real-time data.
• Disadvantages: Requires initial setup cost, technical skills, and maintenance
Computer-Based Information
Systems

•Single set of hardware, software, databases,

telecommunications, people, and procedures:
• That are configured to collect, manipulate, store,
and process data into information
•Technology infrastructure:
• Includes all hardware, software, databases,
telecommunications, people, and procedures
• Configured to collect, manipulate, store, and process
data into information
Computer-Based Information
SystemsCONTINUED
Computer-Based Information
SystemsCONTINUED

•Hardware:
• Consists of computer equipment used to perform
input, processing, and output activities
•Software:
• Consists of the computer programs that govern the
operation of the computer
•Database:
• Organized collection of facts and information,
typically consisting of two or more related data files
Computer-Based Information
SystemsCONTINUED
•Telecommunications, networks, and the Internet
• The electronic transmission of signals for
communications
•Networks
• Connect computers and equipment to enable
electronic communication
•Internet
• World’s largest computer network, consisting of
thousands of interconnected networks, all freely
exchanging information
Computer-Based Information
SystemsCONTINUED
•Intranet:
• Internal network that allows people within an organization to
exchange information and work on projects
•Extranet:
• Network that allows selected outsiders, such as business
partners and customers, to access authorized resources of a
company’s intranet
•People:
• The most important element in most computer-based
information systems
•Procedures:
• Include strategies, policies, methods, and rules for using the
CBIS
Types of ISs
Operation Support Systems

 The role of operation support system is to efficiently

process business transactions, control industrial process
support, enterprise communication, and update
corporate database.
 The Information system generally deals with the
support of business operations known as operation
support system which produces a variety of information
products for external and internal use.
 However, such products produced by OSS needs further
processing for efficient use by manager.
Transaction Processing
System

 It is a category of OSS that generally record and

process data resulting from business transaction.
 It generally process sales, purchase, inventory and
other organizational databases.
 These database then provide the data resources that
can be processed and used by DSS and EIS.
 TPS processes transaction into two ways:
- Batch Processing
- Real Time Processing
Transaction Processing
System CONTINUED

 Batch Processing:
Data is accumulated over a period time and
processed periodically.
It can be for a day, shift, week, or other time period.
Eg. Payroll processing done weekly or biweekly is
an example of batched data.
Disadvantage here can be that data are inaccurate
some of the time because they are not updated in real
time.
Transaction Processing
System CONTINUED

§Real Time Processing: Data is immediately

processed after a transaction occurs.
•OLTP uses client servers so that transactions
can run on multiple computers on a network to
process the transactions in real time.
•Data are accessed directly from the database
and reports can be generated automatically.
•Ex: Sales and Inventory Processing
Process Control Systems

 It is a category of OSS in which decision about a physical

production process are automatically made by computer
through routine decisions that control operational process.
 A Process Control System (PCS) is used to monitor
and control industrial processes automatically, ensuring
they run smoothly and produce consistent, high-quality
results.
 These systems use sensors to collect data, which is then
analyzed by computers to make real-time adjustments.
Process Control Systems CONTINUED

•Example: Server Temperature Control System

•Sensors: Measure the temperature of servers in a data
center.
•Controller: Compares the measured temperature to the
desired setpoint.
•Actuator: Adjusts the cooling system (e.g., fans or air
conditioning) to maintain the desired temperature.
•This system ensures that servers operate within safe
temperature ranges, preventing overheating and potential
hardware failures.
Enterprise Collaboration
System

• It is the information system that uses a variety of information

technology to help the people to work together.
• ECS helps to collaborate and communicate ideas, share resources
and co-ordinate work effort of an organization.
• The aim of an ECS is to use the information technology to enhance
productivity and creativity of organization and work group in an
organization.
• An Enterprise Collaboration System (ECS) is an information
system designed to facilitate communication, collaboration, and
information sharing within an organization. These systems help
teams work together more efficiently, regardless of their physical
location.
Enterprise Collaboration
System CONTINUED

•Example:
•Slack:
• Features: Channels for team communication,
direct messaging, file sharing, and integration
with various third-party applications.
• Use Case: A marketing team uses Slack to
coordinate their campaigns. They create channels
for different projects, share creative assets, and
integrate tools like Trello for task management.
Management Support
System

 Management Support Systems (MSS) are computer-based systems

designed to assist managers in decision-making by providing relevant
information and tools. These systems help managers analyze data, generate
reports, and make informed decisions.

 This generally deals with providing information and

support for effective decision making.
 It helps in designing system frameworks for
organizing information system application.
 It helps in management decision making and
processing of data generated by business operation.
Management Information
System

 MIS is a general-purpose reporting system whose objective is to

provide managers with scheduled reports to track operations,
monitoring, and control.
 A MIS is built on data provided by TPSs.
 MIS are used by middle managers to help insure the smooth
running of an organization in the short to medium term.
 Info provided by these systems allow managers to evaluate an
organization's performance by comparing current output with
previous one.
 Almost all departments like accounting, finance, operations, sales,
etc are supported by information systems designed for their
specific reporting needs.
Types of MIS Reports

1. Periodic Reports: are created or run according to a

preset schedule like daily, weekly, or quarterly. They can
be distributed via e-mail, blogs, intranet, or other
reporting media.
2. Exception Reports: are generated only when
something is outside the norm, either higher or lower
than expected.
3. Ad hoc or on demand reports: are unplanned reports.
They are generated to a mobile device or computer as
needed. They are generated on demand to learn more
about a situation, problem, or opportunity.
Decision Support System

 A Decision Support System (DSS) is a computer-

based information system that supports business or
organizational decision-making activities.
 A DSS is a knowledge-based system used by senior
managers to facilitate the creation of knowledge and
allow its integration into the organization.
 A DSS is an interactive application that supports decision
making by manipulating and building upon the info from
an MIS and/or a TPS to generate insights and new
information in ad hoc reports.
Decision Support
System CONTINUED

•Example: Clinical Decision Support System

(CDSS)
• Scenario: Healthcare Diagnosis and Treatment
• Data Collection: The CDSS collects patient data, including medical history,
lab results, and current symptoms.
• Analysis: It analyzes this data using medical knowledge bases and algorithms
to identify potential diagnoses and treatment options.
• Recommendations: The system provides recommendations for diagnoses
and suggests treatment plans based on the analysis.
• Decision Making: Healthcare professionals use these insights to make
informed decisions about patient care, improving diagnosis accuracy and
treatment effectiveness.
Degree of Structure of
Decisions

 Structured Decisions: are those that have a

well-defined method for solving and the data
necessary to reach a sound decision. Eg. whether
an applicant qualifies for a home loan.
 Unstructured Decisions: are decisions that
depend on human intelligence, knowledge,
and/or experience—as well as on data and
models to solve. Eg. Deciding which new product
to develop, or which new market to enter.
Degree of Structure of
Decisions CONTINUED
• Semi-structured decisions are those that have some clear,
structured elements but also require human judgment and experience
to address the unstructured aspects. These decisions often involve a
mix of quantitative data and qualitative insights.

• Example: Hiring Process in a Company

• Structured Elements:
• Resume Screening: Candidates are evaluated based on
predefined criteria such as education, years of experience, and
specific skills.
• Initial Tests: Standardized tests or assessments are used to
measure candidates' technical abilities or knowledge.
• Unstructured Elements:
• Interviews: Human judgment is crucial in assessing a candidate's
cultural fit, communication skills, and problem-solving abilities.
• Reference Checks: Insights from previous employers or colleagues
provide qualitative data that influence the final decision.
Degree of Structure of Decisions CONTINUED

 What-if Analysis refers to changing assumptions or data in the

model to observe the impacts of those changes on the outcome.
A small retail business owner in Mumbai wants to understand how
changes in sales volume and expenses will affect their monthly profit.
Current Situation:
◦ Sales Volume: 500 units
◦ Price per Unit: ₹200
◦ Fixed Costs: ₹50,000
◦ Variable Costs per Unit: ₹100
Calculate Current Profit:
◦ Revenue: (500 times 200 = ₹100,000)
◦ Total Variable Costs: (500 times 100 = ₹50,000)
◦ Total Costs: (50,000 + 50,000 = ₹100,000)
◦ Profit: (100,000 - 100,000 = ₹0)
Degree of Structure of
Decisions CONTINUED

• What-If Analysis:
• Scenario 1: Increase sales volume to 600 units.
• New Revenue: (600 times 200 = ₹120,000)
• New Total Variable Costs: (600 times 100 = ₹60,000)
• New Total Costs: (50,000 + 60,000 = ₹1,10,000)
• New Profit: (1,20,000 – 1,10,000 = ₹10,000)
• Scenario 2: Decrease variable costs to ₹90 per unit.
• New Total Variable Costs: (500 times 90 = ₹45,000)
• New Total Costs: (50,000 + 45,000 = ₹95,000)
• New Profit: (1,00,000 - 95,000 = ₹5,000)
By performing this what-if analysis, the business owner can see how
changes in sales volume and variable costs impact the overall profit,
helping them make informed decisions
Degree of Structure of Decisions CONTINUED

•Goal seeking in a Decision Support System (DSS)

involves determining the necessary inputs to achieve a
desired output. This technique is particularly useful for
planning and forecasting.
•Example: Profit Planning for a Manufacturing
Company in India
•Scenario: A manufacturing company in Pune wants to
determine the sales volume needed to achieve a target
profit.
•Current Situation:
• Fixed Costs: ₹5,00,000
• Variable Cost per Unit: ₹200
• Selling Price per Unit: ₹500
 Degree of Structure of
Decisions CONTINUED

•Goal Seek Analysis:

• Formula: Profit = (Selling Price per Unit × Sales
Volume) - (Variable Cost per Unit × Sales Volume) -
Fixed Costs
• Set Target: ₹10,00,000
Using goal seek, the DSS adjusts the sales volume until
the profit formula equals ₹10,00,000.
What should be sales volume to get profit of ₹10,00,000?
Degree of Structure of
Decisions CONTINUED

Required Sales Volume: The system

determines that the company needs to sell
approximately 5,000 units to achieve the
target profit.
• This analysis helps the company set realistic
sales targets and plan their production and
marketing strategies accordingly

06/27/2025 66
Executive Information System

 An Executive Information System

(EIS), also known as an executive
support system (ESS), is a type of
management support system that helps
senior executives in decision-making by
providing easy access to important
internal and external information
relevant to organizational goals.
 Executive Information System CONTINUED

Key Features:
•Graphical Displays: EIS often includes graphical displays
and user-friendly interfaces to present data clearly and
effectively.
•Data Integration: It integrates both internal and external
data, providing a comprehensive view of the organization's
performance.
•Trend Analysis: EIS helps in analyzing trends and
identifying patterns, which is crucial for strategic planning.
•Drill-Down Capabilities: Users can drill down into
detailed data to understand the underlying factors
affecting performance.
Executive Information System CONTINUED

•Benefits:
•Improved Decision-Making: By
providing relevant and timely information,
EIS supports better decision-making.
•Enhanced Efficiency: It streamlines the
process of gathering and analyzing data,
saving time for executives.
•Strategic Planning: EIS aids in long-term
strategic planning by highlighting key
trends and performance metrics
Summary of ISs
Expert Systems

An expert system is a type of artificial intelligence (AI)

application that mimics the decision-making abilities of
a human expert.

In the context of information systems, expert systems

are designed to solve complex problems by reasoning
through bodies of knowledge, represented mainly as if-
then rules rather than through conventional procedural
code.
Expert Systems CONTINUED

•Key Components of Expert Systems:

•Knowledge Base: Contains domain-specific and
high-quality knowledge. This is often represented
in the form of rules (if-then statements) and facts.
•Inference Engine: The core component that
applies logical rules to the knowledge base to
deduce new information or make decisions.
•User Interface: Allows users to interact with the
system, input data, and receive advice or
solutions.
•Explanation Facility: Provides users with
explanations about how the system arrived at a
particular conclusion or recommendation
Expert Systems CONTINUED

•Applications:
•Medical Diagnosis: Assisting doctors by
providing diagnostic suggestions based on
symptoms and medical history.
•Financial Services: Offering investment
advice and detecting fraudulent activities.
•Customer Support: Providing automated
responses to customer queries and
troubleshooting issues.
•Manufacturing: Monitoring and controlling
industrial processes
Expert Systems CONTINUED

•Benefits:
•Consistency: Unlike human experts,
expert systems provide consistent
responses without fatigue.
•Availability: They can operate 24/7,
providing expertise whenever needed.
•Documentation: They can document
the reasoning process, which is useful
for auditing and learning purposes.
Knowledge Management Systems

 A Knowledge Management System

(KMS) is a technology-based system
designed to facilitate the collection,
organization, sharing, and analysis of an
organization's knowledge assets.
 In the context of information systems,
KMS plays a crucial role in enhancing
organizational performance by ensuring
that valuable knowledge is readily
accessible to those who need it.
Knowledge Management
Systems CONTINUED

•Key Components of a KMS:

•Knowledge Repository: A centralized storage for
documents, data, best practices, and other knowledge
assets.
•Search and Retrieval Tools: Advanced search
functionalities that help users quickly locate specific
information.
•Collaboration Features: Tools like discussion forums,
wikis, and shared workspaces that promote knowledge
sharing and collective problem-solving.
•Access Control and Security: Mechanisms to protect
sensitive information, including role-based access controls
and encryption.
•Analytics and Reporting: Capabilities to track usage,
identify knowledge gaps, and make data-driven decisions.
Knowledge Management Systems CONTINUED

•Integration Capabilities: Seamless integration with

other organizational systems like CRM, ERP, and project
management tools
•Benefits of a KMS:
•Efficient Knowledge Sharing: Promotes collaboration
and breaks down silos within the organization.
•Enhanced Decision-Making: Provides easy access to
well-organized knowledge, supporting informed
decisions.
•Improved Productivity: Saves time by streamlining the
process of finding and using information.
•Innovation and Continuous Improvement: Facilitates
the sharing of best practices and innovative ideas