Chapter 1

Foundation concepts of
Information System
FUNDAMENTAL OF INFORMATON SYSTEM
1. BASIC CONCEPTS- Data, Information and
Knowledge
•Data
 represents facts or figures obtained from experiments or surveys,
used as basis for making calculations or drawing conclusions.
is the product of symbols or representations of an event or facts
about the world, like number, letter, pictures, lines graphs, etc. .
Data without a context has no meaning
- They are the elements that are inputted, stored and manipulated
by the computer.
- The validity of a data (how far they reflect the reality or represent
the real world) is very important.
- They are valid as far as they accurately represent the real world.
• Raw Material/facts
• Numbers and strings of letters with no precise context or meaning
Data, Information, and Knowledge (continued)
 Con’t…
Information
 is data that has been given a meaning by way of relational connection.
 This relational connection converts data in to information.
 In computer system for instance, a relational database makes for
information from the data stored within it.
 Is a collection of facts organized and processed so that they have
additional value beyond the value of the individual facts.
 Information is data with context. Therefore, information is context
dependent.
 When does data become information?
 When you put a whole lot of data together that is related to one subject it yields
information.
• E.g. take a telephone book; it is developed by bringing different data
together (Name, Address and Telephone number).
 information= (Sets of data) + (relational connection among data sets)
 Data + understanding of relationship = information
 Con’t…
 Note the type of information created depends on the relationships defined
among existing data.(We can associate data to different things and give it
different meanings.)
 For example:- If we take number "5", it can be associated with:
 Cardinal number and has one meaning, and
 A number greater than 4 and less than 6 with another meaning.
 Turning data into information is a process, or a set of logically related
tasks performed to achieve a defined outcome.
 The process of defining relationships among data to create useful
information requires
 fig: 1.1: process of turning data into information
 Characteristics of Valuable Information

• Relevant
• Complete
• Accurate
• Current/Timely
• Economical
• Accessible
 …Con’t
•Knowledge
 Knowledge is the awareness and understanding of a set of information
and the ways that information can be made useful to support a specific
task or reach a decision.
 When does information become knowledge?
 Information becomes knowledge when one is able to understand the
patterns that exist within information and their implication.
o For example: If I put Birr 100 in my saving account and the bank
pays 5% per annual, at the end of one year Interest = Birr 5 and
principal = 105.
• Understanding this pattern represents knowledge and it enables
to understand the results it will produce.
• Therefore, knowledge= Information + understanding of the pattern
 …Con’t
Types of Knowledge
A. Explicit or formal knowledge- knowledge that has been expressed into
words and numbers.
 It can be shared in the form of data, specifications, books, manuals, drawings,
audio or videotapes, Documented work computer programs, Procedures,
Policies. etc.
B. Tacit or informal knowledge (as opposed to formal, codified or
explicit knowledge) is the kind of knowledge that is difficult to transfer
to another person by means of writing it down or verbalizing it.
 Tacit knowledge is knowledge that's difficult to write down,
visualize or transfer from one person to another.
- Examples: -insights, intuitions, and hunches, that are not
verbalized or documented. It comes from years of
experience in research, problem solving, decision making,
etc.
Data transformed into Information
Data transformed into Information
 1.2 Definition of Information System
•System Concept
 A System is a set of components that interact with one another and serve
for a common purpose or goal.
• Components that work together to achieve a goal by accepting input,
processing it, and producing output in an organized manner.
– e.g. a sound system
Components of a System
 Systems
Systems may be:
Systems have been classified in different ways.
Widespread classifications for systems are:
a) Physical or Abstract
b) Open or Closed
c) Man-made Information Systems
 System….
a) Physical Systems:
 Physical systems are tangible or the material entities.
 In the case of a library, the physical parts are the books,
shelves, desks, chairs, etc.
 They can be visible and countable.
b) Abstract Systems:
 Abstract systems are conceptual on non-physical entities.
They may be formulas of relationships among sets of variables
or models- the abstract conceptualization of physical
situations.
 For example a model is a representation of a real or planned
system.
The utilization of models makes it simpler for the analyst to
visualize relationships in the system under study
 Open vs. Closed Systems
c) Open Systems:
 An open system is one which has several interfaces with its environment.
 It allows interface across its boundary.
 It receives inputs and delivers outputs to the outside.
 The library system falls into this category, since it must adapt to the
changing demands of the user.
d) Closed Systems:
 A closed system is one that is isolated from environmental influences.
 In actual, a closed system is uncommon.
 In system analysis, organizations, applications, and computers are
invariably open, dynamic systems influenced by their environment.
 The concept of closed system is more relevant to scientific systems than
to social systems.
 …Con’t
Characteristics of Systems
•Every system has the following nine main characteristics:
1. Components: - are parts of a system.
 It can be is either an irreducible part or an aggregate of parts, also called a
subsystem.
2. Input: -is anything entering the system from the environment.
3. Output:- is anything leaving the system crossing the boundary to the
environment
4. Interrelationships:- the function of one is somehow tied to the function of the
others
5. Boundary: -within which all of its components are contained and which
establishes the limits of a system, separating it from other systems.
6. Interface:-The point at which the system meets its environment
7. Purpose:- the reason for the existence of a system
8. Constraints: -are things that limit a system from achieving its purpose or
objective.
9. Environment: -everything outside the system’s boundary. The environment
surrounds the system, both affecting it and being affected by it.
So, What is an Information System?
 Information Systems
…Con’t
 An Information System (IS) is a collection of interrelated
components that collect, process, store, and provide as output the
information needed to complete a business task.
 An information system (IS) is a set of interrelated elements or
components that collect (input), manipulate (process), store, and
disseminate (output) data and information and provide a corrective
reaction (feedback mechanism) to meet an objective (see the Figure
below).
 The feedback mechanism is the component that helps
organizations achieve their goals, such as increasing profits
or improving customer service.

Fig1.3: converting data into Information

 Input, Processing, output and feedback
 Input: - is the activity of gathering and capturing raw data. In producing
paychecks
 Example:
o In a university grading system, instructors must submit student grades
before a summary of grades for the semester or quarter can be compiled
and sent to students.
 Processing: -Means converting or transforming data into useful outputs.
 Processing can involve making calculations,
comparing data and taking alternative actions, and
storing data for future use.
 Output: -involves producing useful information, usually in the form of
documents and reports.
 Output’s data are returned to the input of the system.
 Feedback: -is information from the system that is used to make changes to
input or processing activities.
 …Con’t
Feedback:
• It can be either:

 Negative Feedback
 Negative feedback is corrective feedback that helps maintain
the system within a critical operating range and reduces
performance fluctuations around the norm or standard.

 Positive Feedback
 In contrast to negative feedback, which is corrective, positive
feedback reinforces the operation of a system by causing it to
continue its performance and activities without changes.
o Feedback is a critical to successful operation of the a system
 1.3 Components of Information Systems
- Information systems have the following components
o Hardware
o Software
o Database
o People
o Procedure
o Telecommunications
Components of information system
Components of information system
 …Con’t
•Hardware
- Consists of the physical components of a
computer that perform the input, processing,
storage, and output activities of the computer.
- It includes:-
 Input devices: - used to put or insert data into a computer
system.
 Processing devices: - is the part of the computer that receives
input, processes the input and gives output.
 Storage Devices: -is any hardware capable of holding
information either temporarily or permanently.
 Output Devices:-Devices that display, print, or transmit the
results of processing from the computer’s memory.
 …Con’t
•Software
- Consists of the computer programs that govern the operation of the computer.
- Allow a computer to process payroll, send bills to customers, and provide
managers with information to increase profits, reduce costs, and provide better
customer service.
- There are two types of software:-
 System software: - consists of programs that coordinate the activities of the
hardware and other programs in a computer system.
 Operating System such as Microsoft Windows, Vista and Windows 7…
 Utility Programs such as recovery software, backup software…
 Application Software
 Productivity software
 Home/ domestic software
 Education software
 Entertainment software
 …Con’t
•Database
- A database is an organized collection of facts and information,
typically consisting of two or more related data files.
- An organization’s database can contain facts and information
on customers, employees, inventory, competitors’ sales, online
purchases, and much more.
- A database manager
- Example: for a large bank has developed a patented security
process that generates a random numeric code from a
customer’s bank card that can be verified by a computer
system through a customer database. Once the bank card and
customer have been verified, the customer can make financial
transactions.
 …Con’t
•Telecommunications
- is the electronic transmission of signals for communications, which
enables organizations to carry out their processes and tasks through
effective computer networks.
- Telecommunications can take place through wired, or wireless

•People
- are the most important element in most computer-based information
systems.
- They make the difference between success and failure for most
organizations.
- Information systems personnel include all the people who manage, run,
program, and maintain the system, including the CIO(Chief Information
Officer), who manages the IS department.
o Users are people who work with information systems to get results.
o include financial executives, marketing representatives, manufacturing
operators, and many others.
 …Con’t
•Procedures
- Procedures include the strategies, policies, methods, and rules for using
the IS, including the operation, maintenance, and security of the
computer.
- For example, some procedures describe when each program should be
run. Others describe who can access facts in the database or what to do
if a disaster, such as a fire, earthquake, or hurricane, renders the IS
unusable.
- Good procedures can help companies take advantage of new
opportunities and avoid potential disasters.
- Poorly developed and inadequately implemented procedures, however,
can cause people to waste their time on useless rules or result in
inadequate responses to disasters, such as hurricanes or tornadoes.
 1.4 Technology Side of Information System
• An information system can be defined as set of coordinated network of
components, which act together towards producing, distributing and or
processing information.
• An important characteristic of computer-based information systems
information is precision, which may not apply to other types.
• In any given organization information system can be classified based on
the usage of the information.
• Therefore, information systems in business can be divided into
operations support system and management support system.
• Everyday knowingly or unknowingly, everyone is utilizing information
technology.
• It has grown rapidly and covers many areas of our day to day life like
movies, mobile phones, the internet, etc.
 …Con’t
• Information technology can be broadly defined as integration of
computer with telecommunication equipment for storing, retrieving,
manipulating and storage of data.
• Technology greatly enhances the performance of economy; it
provides edge in solving social issues as well as making information
system affordable and user friendly.
• Information technology has brought big change in our daily life be it
education, life at home, work place, communication and even in
function of government.
 Comparison of Information System and Information
Technology
• Information system and information technology are similar in many ways but at the
same time they are different.
• Following are some aspects about information system as well as information
technology.
– Origin: Information systems have been in existence since pre-mechanical era in form of books,
drawings, etc. However, the origin of information technology is mostly associated with
invention of computers.
– Development: Information systems have undergone great deal of evolution, i.e. from manual
record keeping to the current cloud storage system. Similarly, information technology is seeing
constant changes with evermore faster processor and constantly shrinking size of storage
devices.
– Business Application: Businesses have been using information systems for example in form of
manual books of accounts to modern TALLY. The mode of communication has also gone under
big change, for example, from a letter to email. Information technology has helped drive
efficiency across organization with improved productivity and precision manufacturing.
 1.5 The People Side of Information System
• Commonly People is one component of Information System,
to gain the maximum benefits from your company's
information system, you have to exploit all its capacities.
• Information systems gain their importance by processing the
data from company inputs to generate information that is
useful for managing your operations.
• To increase the information system's effectiveness, you can
either add more data to make the information more accurate
or use the information in new ways.
 …Con’t
• Communication
– Each employee can communicate additional information by making changes that
the system tracks.
– The manager collects the inputs and sends the newly revised document to his
target audience.
• Operations
– Allowing you to operate your company more efficiently.
– With guidance from the information system, you can modernize your operations.
• Decisions
– The company information system can help you make better decisions by
delivering all the information you need and by modeling the results of your
decisions.
– A decision involves choosing a course of action from several alternatives and
carrying out the corresponding tasks
• Records
– Company needs records of its activities for financial and regulatory purposes as
well as for finding the causes of problems and taking corrective action.
 1.7 The Future of Information System function
within the firm
• Information systems have evolved at a rapid pace ever since their introduction in the
1950s.
• The Internet has made the entire world accessible to us, allowing us to communicate
and collaborate with each other like never before.
• The followings are future of Information System:
Global
• The first trend to note is the continuing expansion of globalization.(Iran,
Indonesia)
Social
• Social media growth is another trend that continues(Facebook, Twitter…)
Personal
• Ability to personalize how we use technologies(mobile, computer…)
Mobile
• Beginning with the simple cellphone in the 1990s and evolving into the
smartphones and tablets of today, the growth of mobile has been
overwhelming.
 …Con’t
Wearable
• The average smartphone user looks at his or her smartphone 150 times a
day for functions such as messaging (23 times), phone calls (22), listening
to music (13), and social media (9).
• Many of these functions would be much better served if the technology was
worn on, or even physically integrated into, our bodies. This technology is
known as a “wearable.”
• Wearable technologies are such as hearing aids and, later, Bluetooth earpieces.
• Explosion of new wearable technologies are:
– Google Glass-will project images into your field of vision based on your
context and voice commands.
– Augmented reality device, health care….
 …Con’t
Collaborative
• Reporting our location in order to update traffic statistics.
• Other data can be reported actively, such as adding our rating of a
restaurant to a review site
• Example:
– Smartphone app Waze: a community-based tool that keeps track of
the route you are traveling and how fast you are making your way to
your destination.
– Yelp! allows consumers to post ratings and reviews of local
businesses into a database.
Printable
– 3-D printer.
• Allows you to print virtually any 3-D object based on a model of
that object designed on a computer.
• Made by glass, metals, or even wax.
Findable
…Con’t
• The “Internet of Things” refers to the idea of physical objects being
connected to the Internet.
• Advances in wireless technologies and sensors will allow physical
objects to send and receive data about themselves.
• In a 2010 report by McKinsey & Company on the Internet of Things, six
broad applications are identified:
– Tracking behavior.
– Enhanced situational awareness.
– Sensor-driven decision analysis.
– Process optimization.
– Optimized resource consumption.
– Complex autonomous systems.
 …Con’t
Autonomous
• is emerging is an extension of the Internet of Things: autonomous robots and
vehicles.
• By combining software, sensors, and location technologies, devices that can
operate themselves to perform specific functions are being developed.
• These take the form of creations such as medical nanotechnology robots
(nanobots), self-driving cars, or unmanned aerial vehicles (UAVs).
– Nanobot are a robot whose components are on the scale of about a nanometer,
which is one-billionth of a meter.
– While still an emerging field, it is showing promise for applications in the
medical field.
– For example, a set of nanobots could be introduced into the human body to
combat cancer or a specific disease.
TYPES OF INFORMARTION SYSTEM
 INTRODUCTION

 Successful companies typically employ six different

Information systems to ensure that every aspect of the
organization's data is properly managed and used to
improve decision-making and problem-solving.
 Information Systems are classified by organizational
levels, mode of data, processing, system objectives and
type of support provided.
 Types of information system
Transaction Processing
System (TPS)
Management Information
System (MIS)
Decision Support System
(DSS)
Executive Information
System (EIS)
Expert System (ES)
Office Automation System
Decision-Making Levels of an Organization

Executive level (top)

• Long-term decisions
• Unstructured decisions
Managerial level (middle)
• Decisions covering weeks and months
• Semi-structured decisions
Operational level (bottom)
• Day-to-day decisions
• Structured decisions
Types of information system
 1. Transaction Processing Systems (TPS)
• Every firm needs to process transactions in order to perform its
daily business operations.
– A transaction refers to any event or activity that affects the
organization.
– A business activity between seller and buyer to exchange an
asset for payment is called transaction.
• Depending on the organization’s business, transactions may differ
from one organization to another.
• In a manufacturing unit, for example, transactions include order
entry, receipt of goods, shipping, etc.,
• while in a bank, transactions include deposits and withdrawals,
cashing of cheques, etc.
 Examples:
• Automated Teller Machine –
• enables financial transactions without the need of a
cashier/human assistance.
• Airline Reservation System -
• Allows you to purchase and reserve plane tickets online
• Bill system,
• payroll system,
• Stock control system.
• Etc.
 Transaction Processing Systems (TPS)
Types of Transaction
 Internal Transactions:
▪ internal to the company and are related with the internal working
of any organization.
▪ For example: Recruitment Policy(SELECTING), Promotion Policy,
Production policy etc.
 External Transactions:
▪ external to the organization and are related with the external
sources, are regarded as External Transaction.
▪ For example: sales, purchase, etc .
TPS
TYPES OF TPS
 Key Features of TPS
 Rapid response –
• fast performance with rapid results
 Reliability –
• well designed backup and recovery with a low failure rate
 Inflexibility –
• treat every transaction equally. It may be used many times
each day which means it has to be precise and inflexible
 Controlled processing
• maintain specific requirements for the roles and
responsibilities of different employees.
 Management Information Systems
• Management information systems are specially developed to
support the planning, controlling, and decision-making functions of
middle managers.
• A management information system (MIS) extracts transaction data
from underlying TPSs, compiles them, and produces information
products in the form of reports, displays, or responses.
• Management information systems use simple routines like
summaries and comparisons which enable managers to take
decisions for which the procedure of reaching a solution has been
specified in advance.
 Cont…
• A typical MIS report is a summary report, such as a report on the
quarterly sales made by each sales representative of the
organization.
• Usually, management information systems are used to produce
reports on a monthly, quarterly, or yearly basis.
• However, if managers want to view the daily or hourly data, MIS
enables them to do so.
• Many different types of report are produced in MIS.
• Some of the reports are a summary report, on-demand report, ad-
hoc reports and an exception report.
Cont…
Features of MIS
 MIS - Examples
Some examples of MIS
• Sales management systems

• Inventory control systems

• Budgeting systems
• Management Reporting Systems (MRS)
• Personnel (HRM) systems
 Decision Support Systems
• Decision Support System(DSS): A decision support system
(DSS) is a computer-based information system that supports
business or organizational decision-making activities.
• Decision Support System is an interactive information system
that provides information, models and data manipulation
tools to help in making the decision in a semi-structured and
unstructured situation.
 Cont…
• A decision support system (DSS) is an interactive computer-based
information system that, like MIS, also serves at the management
level of an organization.
• However, in contrast to MIS, it processes information to support
the decision-making process of managers.
• It provides middle managers with the information that enables
them to make intelligent decisions.
• A decision support system in a bank, for example, enables a
manager to analyze the changing trends in deposits and loans in
order to ascertain the yearly targets.
 Some examples of DSS
• Financial planning systems,
• Bank loan management systems.)
• Logistics systems
• Spreadsheet Models
• Etc.
 Executive Information System (EIS)
• An executive Support system (ESS) is an extension of MIS – is a
computer-based information system that helps in decision-making
at the top level of an organization.
• The decisions taken with the help of an executive support system
are non-routine decisions that affect the entire organization and,
thus, require judgment and sight.
• As compared to DSSs, ESSs offer more general computing
capabilities, better telecommunications, and efficient display
options.
• They use advanced graphics software to display critical
information in the form of charts or graphs that help senior
executives to solve a wide range of problems.
 Cont…
• To make effective decisions, they use summarized internal data
from MIS and DSS as well as data from external sources about
events like new tax laws, new competitors, etc.
• They make a variety of internal and external information readily
available in a highly summarized and convenient form.
• They also assist senior managers in answering the
following question:
• What business should we do?
• How are our competitors doing the business?
• Which units can be sold and which new units are to be bought?
 Generally,
 Specialized form of DSS
 Used by top-level managers
 Reduce the information overload on executive
 Makes use of internal and external information
 Provides managers and executives flexible access to information
for monitoring operational results and general business
conditions
 Provides a comprehensive picture of business performance by
analysing key performance indicators for growth
 Meets strategic information needs of the top management
 Also known as Executive Support System
 Office Information Systems
• An office automation system (OAS) is a collection of
communication technology, computers, and persons to perform
official tasks.
• It executes office transactions and supports official activities at
every organizational level
• These activities can be divided into
– clerical and (relating to work done in an office)
– managerial activities.
Cont…
 Cont…
• Clerical activities performed with the help of an office
automation system include preparing written communication,
typesetting, printing, mailing, scheduling meetings, calendar
keeping. etc.
• Under managerial activities, an office automation system helps
in conferencing, creating reports and messages, and controlling
the performance of the organization.
• Many applications like word processing, electronic filing, and e-
mail are integrated into office automation systems.
 Cont…
• The main objective of OIS is to facilitate communication between
the members of an organization and between the organization and
its environment.
• OIS are used to:
1. Help manager documents represented in an electronic format
2. Handle messages, such as electronic mail, facsimile, and voice
mail
3. Facilitate teleconferencing and electronic meetings
4. Facilitate the use of the Internet for communication and access
to information
5. Facilitate the use of task-oriented teams through the use of
groupware.
COMPONENTS OF OFFICE AUTOMATION SYSTEM AND THEIR
FUNCTIONS
 Expert System (ES)
• An expert system is a knowledge-based information system;
that is, it uses its knowledge about a specific area to act as an
expert consultant to users.
• Expert systems provide answers to questions in a very specific
problem area by making human like inferences about
knowledge contained in a specialized knowledge base.
• Is an information system that captures and stores the
knowledge of human expert and then emulates human
reasoning and decision making process for those who have less
expertise
 Expert systems
• Experts systems include expertise in order to aid managers in
diagnosing problems or in problem-solving.
• These systems are based on the principles of artificial intelligence
research.
• Experts Systems is a knowledge-based information system.
• It uses its knowledge about a specify are to act as an expert
consultant to users.
• Knowledge base and software modules are the components of an
expert system.
Cont…
- End -