UNIT 2: SUBSYSTEMS OF INFORMATION SYSTEM

1. INFORMATION TECHNOLOGY
FOR BUSINESS-I
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UNIT-2
SUBSYSTEMS OF INFORMATION SYSTEM
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3. What is an Information System?
An information system is a combination of software, hardware, and
telecommunication networks to collect useful data, especially in an organisation.
So, the purpose of an information system is to turn raw data into useful information
that can be used for decision making in an organization.
Business firms and other organizations rely on information systems to carry out and
manage their operations, interact with their customers and suppliers, and compete in
the marketplace.
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Typical Components of Information Systems
1. Hardware: Computer-based information systems use computer hardware, such as processors,
monitors, keyboard and printers.
2. Software: These are the programs used to organize, process and analyze data.
3. Databases: Information systems work with data, organized into tables and files.
4. Network: Different elements need to be connected to each other, especially if many different
people in an organization use the same information system.
5. Procedures: These describe how specific data are processed and analyzed in order to get the
answers for which the information system is designed.
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5. Types of Information Systems
1. Transaction Processing System (TPS):
● Transaction Processing System are information system that processes data resulting from the
occurrences of business transactions
● Their objectives are to provide transaction in order to update records and generate reports i.e
to perform store keeping function
● The transaction is performed in two ways: Batching processing and Online transaction
processing.
● Example: Bill system, payroll system, Stock control system.
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Important features of transaction processing system
The following are the important features of Transaction Processing System:
● Rapid response
The response time of a TPS is important because a business cannot afford to have their
customers waiting for long periods of time before making a transaction.TPS system are
designed to process transactions virtually instantly.
● Reliability
Transaction processing system should be reliable. Customers will not tolerate mistakes.
TPS system is always should contain sufficient safety and security measures.
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● Inflexibility
A TPS wants every transaction to be processed in exactly the same way, regardless of the user, the
customer or the time of day. Transaction must be processed in the same way each time to maximize
efficiency. If a TPS was flexible, different types of data would be entered in different orders.
● Historical data
TPS produces information on the historical basis. Because TPS generate information taking into
account transactions already taken place in the organization.
● Link with external environment
Transaction processing system establishes the relation with external environment Because TPS
distributes information to its customers and suppliers.
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● Controlled access
Since TPS systems can be such a powerful business tool, it must be able to allow only
authorized employees to access it at any time. Restricted access to the system ensures that
employees who have the authority will only be able to process and control transaction.
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11. Examples of transaction processing systems (TPS)
Some examples of TPS are:-
● Online store
● Buying through credit/debit card
● Bus/railway ticket reservation
● Payroll
● Employee record-keeping
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12. Advantages of transaction processing systems (TPS)
1.Productivity:
By using TPS, the staff of the company increases their productivity. Also, customers get
more trust and satisfaction in the company.
2.Fast:
The transactions are carried out in fast time and there is no delay. The real-time transaction
is also a type of TPS in which no delay in time occurs.
3.Low cost:
As most of the work is carried out by TPS so less staff is needed to be hired.
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4.Large data:
TPS can process a large amount of data. There are thousands of transactions done by the TPS on daily
basis.
5.Use anywhere:
TPS can be used anywhere you want. You can use it in organizations, stores, banks, schools etc. Also,
customers can do transactions online from anywhere.
6.Error recovery:
If some data is lost in the transaction, then it can be retrieved by the TPS. The system also self-solves
issues and errors are detected and removed by the system easily.
7.Easy to use:
Staff can easily use the TPS software and there is little or no training required to use the TPS software.
It is also user friendly.
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13. Disadvantages of transaction processing systems
(TPS)
1.Setup cost:
The initial setup cost of TPS is high. You have to buy a license for TPS software. Also, you
need to buy computers, cameras and price detecting devices.
2.Incompatible:
Sometimes your software and hardware have compatibility problems. Some hardware has
drivers problems.
3.Overload problem:
Sometimes there occurs a high number of transactions on the TPS so it slows down the
system or it stops working.
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4.High internet:
Users need to have a high internet connection to use the TPS.
5.Standard format:
TPS lacks a standard format.
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15. 2. Management Information System (MIS)
● Management Information System is designed to take relatively raw data available
through a Transaction Processing System and convert them into a summarized and
aggregated form for the manager, usually in a report format. It reports tending to be used
by middle management and operational supervisors.
● 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.
● Example: Sales management systems, Human resource management system.
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Process of MIS
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1. Continuous system : MIS is a permanent and continuous system of collecting
information. It collects information continuously.
2. Basic objective : The basic objective of MIS is to provide the right-information at the
right-time to the right-people to help them take right decisions.
3. Computer based system : MIS is a computer-based system. It uses computers for
storing, analyzing and supplying information. It also uses micro-films for storing
information. Therefore, it is very quick and accurate.
4. Future-oriented : MIS is future-oriented. It provides information for solving future
problems. It is not past-oriented.
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Micro-films
Microfilm and microfiche
are utilized to keep
information, such as
financial documents, student
records, engineering
drawings, land records,
newspapers and other
historical documents, in a
storage-friendly and
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5. Used by all levels : MIS is used by all three levels of management, i.e. top, middle and
lower. It is used for making marketing plans, policies and strategies. This is used to solve
marketing problems and to take advantage of business opportunities.
6. Sources : MIS collects information from both, internal and external sources. For
example, information is collected from company records, publications, etc.
7. Collects marketing information : MIS collects all types of marketing information. It
collects information about the consumer competition, marketing environment, government
policies, etc. It supplies this information to the marketing managers.
8. Helps in decision making : MIS supplies up-to-date and accurate information. It helps
marketing managers to take quick and right decisions.
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21. Advantages of Management Information systems
(TPS)
1. Improved decision making: The first and foremost advantage of MIS is that it
facilitates managers in effective decision making. It is a computerized system which
supplies all relevant information to managers in timely manner.
2. Fast data processing and information retrieval: This is one of crucial role played
by the computerized information system. Businesses are able to convert raw data into
a meaningful piece of information at a faster rate. It results in providing quality
services to customers/clients.
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3. Eliminates data duplication: MIS designs database systems in a way where
duplication of data can be minimized to maximum possible level. Whenever a
data is uploaded in one department, it automatically become available to other
departments also.
4. Improved data accuracy: Implementation of data validation and verification
checks is quite easier in computerized information system as compared to manual
system. This way it ensures more accuracy of data stored on company’s database.
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22. Disadvantages of MIS
1. Quite expensive to setup and configure: Major disadvantage in MIS is that an
organization need to incur huge expenses in order to implement this system. There is
a requirement of lots of hardware devices as well as software for running this
information system.
2. Risk of fraud: It is must to ensure proper controls and checks at every point of
transaction. In case of any lapse, there may be some risky instances like intruder
posting unauthorized transactions like invoice for products which were never
delivered etc.
3. Heavy reliance on technology: There is a large dependence upon technology in
computerized information system. In case of any failure to hardware or software, the
information cannot be accessed until the needed software or hardware gets replaced.
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The Role of Management Information Systems in Decision
Making
1. Rapid Access to Information
Managers need rapid access to information to make decisions about strategic, financial,
marketing and operational issues. Companies collect vast amounts of information, including
customer records, sales data, market research, financial records, manufacturing and inventory
data and human resource records.
2. Decisions Based on Latest Information
Management information systems bring together data from inside and outside the organization.
By setting up a network that links a central database to retail outlets, distributors and members
of a supply chain, companies can collect sales and production data daily, or more frequently, and
make decisions based on the latest information.
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3. Teams Can Collaborate
In situations where decision-making involves groups, as well as individuals, management information systems
make it easy for teams to make collaborative decisions. In a project team, for example, management
information systems enable all members to access the same essential data, even if they are working in different
locations.
4. Interpret Results Efficiently
Decision-makers can also use management information systems to understand the potential effect of change. A
sales manager, for example, can make predictions about the effect of a price change on sales by running
simulations within the system and asking a number of “what if the price was” questions.
5. Ease of Presentation
The reporting tools within management information systems enable decision-makers to tailor reports to the
information needs of other parties. If a decision requires approval by a senior executive, the decision-maker
can create a brief executive summary for review. If managers want to share the detailed findings of a report
with colleagues, they can create full reports and provide different levels of supplementary data. 45
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24. 3. Decision Support System (DSS):
A decision support system (DSS) is a computer program application used to
improve a company's decision-making capabilities. It analyzes large
amounts of data and presents an organization with the best possible options
available.
Decision support systems bring together data and knowledge from different
areas and sources to provide users with information beyond the usual reports
and summaries.
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Purpose of Decision Support System
● In an organization, a DSS is used by the planning departments – such as the operations
department – which collects data and creates a report that can be used by managers for
decision-making. Mainly, a DSS is used in sales projection, for inventory and
operations-related data, and to present information to customers in an easy-to-understand
manner.
● One of the main applications of a DSS in an organization is real- time reporting. It can be
very helpful for organizations that take part in just-in-time (JIT) inventory management.
● In a JIT inventory system, the organization requires real-time data of their inventory levels
to place orders “just in time” to prevent delays in production and cause a negative domino
effect.
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Just-in-Time
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Features of Decision Support System
1. Performs Complex, Sophisticated Analysis and Comparisons Using Advanced Software
Packages -
There are several programs (part of DSS) used by various methods that analyse the raw data.
2. Provides Report and Presentation Flexibility -
This information gathered with the help of DSS may be displayed on the computer screen or can
be printed according to the need of the decision makers. Managers get access to different kinds of
reports in formats that fit to their requirement.
3. Provides Rapid Access to Information -
Continuous and Rapid access of information is offered by DSS.
For example : The metres on the dashboard of a vehicle are used to keep a watch on how the
vehicle is running.
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4. Supports Drill-Down Analysis -
DSS helps the manager in going through details of the project by drilling down through data.
For example : When reviewing the total project cost, the manager can easily break it down to estimate
the cost for each phase, activity or task.
5. Handles Large Amounts of Data from Different Sources -
DSS has the ability to accumulated data from different databases which are stored on different computer
systems or networks. It can also source data from the internet.
6. Offers both Textual and Graphical Orientation -
DSS can produce information in a wide variety of text and graphics such as plain texts, tables, Pie
Charts, Trends Lines, line drawings etc. All of these provide a better understanding of a situation to
managers and help them to communicate the same to others.
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Advantages of Decision Support System
1. Facilitating Communication -
DSS helps in indicating when a particular action should be adopted in future or why a particular action was
acceptable in the past. The DSS facilitates interpersonal communication and hence it is used as a tool for
benefit of business
2. Increasing Organisational Control -
DSS control this information, which is in turn used by the managers in assessing the productivity of an
individual in the quantity and quality of their decision making ability. Some DSS can evaluate the individual's
decision making skills.
3. Improving Personal Efficiency -
DSS aids in improving personal efficiency. Although it does not do any work in actual but it aids in doing any
work a bit faster and with greater efficiency.
For example : Budgets where earlier prepared manually before spreadsheets software was discovered but DSS
helps to make work faster with less changes of error. 54

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4. Promoting Learning or Training -
DSS helps people to learn more about computer and software packages that are present
in it. Although, this was never the motive of DSS but it promotes learning as well.
5. Improving Problem Solving -
DSS helps a personal or a group of people in solving problem at a much faster pace with
accuracy. When probably applied, it increases the efficiency of a task. It aids in solving
the problem as a whole.
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Disadvantages of Decision Support System
● The cost to develop and implement a DSS is a huge capital investment, which makes it less
accessible to smaller organizations.
● A company can develop a dependence on a DSS, as it is integrated into daily decision-making
processes to improve efficiency and speed. However, managers tend to rely on the system too
much, which takes away the subjectivity aspect of decision-making.
● A DSS may lead to information overload because an information system tends to consider all
aspects of a problem. It creates a dilemma for end-users, as they are left with multiple choices.
● Implementation of a DSS can cause fear and backlash from lower-level employees. Many of them
are not comfortable with new technology and are afraid of losing their jobs to technology.
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29. The Role of Decision Support System in Decision Making
1. Common Day-to-Day Decision Support System Examples
Decision support systems operate at many levels, and there are many examples in common day-to-day
use. For example, GPS route planning determines the fastest and best route between two points by
analyzing and comparing multiple possible options. Many GPS systems also include traffic avoidance
capabilities that monitor traffic conditions in real time, allowing motorists to avoid congestion.
Farmers use crop-planning tools to determine the best time to plant, fertilize and reap. Medical
diagnosis software that allows medical personnel to diagnose illnesses is another example. Most
systems share a common attribute in that decisions are repetitive and based on known data. However,
they aren't infallible and may make incorrect or irrational decisions, something many early GPS users
discovered.
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2. Decision Support System Use Historical Data
Historical data analysis, used in every facet of business and life, is well-developed and mature. Although
such information is not always directly actionable, it's an important part of DSS because it reports past
performance and highlights areas that need attention. Some examples include:
● Descriptive analytics: Metrics such as sales results, inventory turnover and revenue growth.
● Diagnostic analytics: Diagnostic information that digs a bit deeper to reveal results and explains
reasons for past performance as measured by descriptive analytics.
● Business intelligence (BI): Although largely based on historical data, BI solutions allow users to
develop and run queries that are used to guide and support decision-making.
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3. Manual and Hybrid Decision Support System
Numerous manual techniques exist that support decision-making. These include activities
such as the SWOT analysis where teams determine their organization's strengths and
weaknesses as well as identifying threats facing the organization and potential
opportunities for further growth. The outcomes of a SWOT analysis are actionable
decisions for moving the organization forward. Other manual tools include decision
matrices, Pareto analysis and cost benefit analyses.
Hybrid DSS solutions include the use of spreadsheet analyses that tap into the capability of
Excel to compute, analyze, compare options and evaluate what-if scenarios.
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4. DSS Software that Helps Predict Future Trends
While it's essential to understand what happened in the past, and why it happened, this
knowledge is of limited use when trying to predict the future, except possibly in very
stable and predictable environments. However, this is hardly ever the case.
Fortunately, techniques exist that make it possible to predict, with a degree of
certainty, future trends and changes which will impact a company or business.
For example, these tools can predict, based on past performance, external data and
market feedback, figures for future product demand, product obsolescence and
returns.
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Group Decision Support System (GDSS)
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(GDSS) (DSS)

32. 3. Group Decision Support System (GDSS):
● It is a system that supports decision- making and has been designed and structured in such
a way so that the members constituting a group can interact with each other to arrive
at a particular decision. It provides support for various group decision-making activities
such as file sharing, integration of the individual opinions with that of the group,
communication, modelling of group actions and any other action which requires
interaction of the group members.
● The decision support systems that have been mentioned till now facilitate a single person
to take decisions by providing computerised support. Most of the decisions that have to be
taken in the organisation are generally a group effort rather than taken by a single person.
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Features of Group Decision Support System (GDSS):
1) Ease of Use : It consists of an interactive interface that makes working with GDSS simple and easy.
2) Better Decision Making : It provides the conference room setting and various software tools that
facilitate users at different locations to make decisions as a group resulting in better decisions.
4) Specific and General Support : The facilitator controls the different phases of the group decision
support system meeting (idea generation, discussion, voting and vote counting, etc.) what is displayed
on the central screen and the type of ranking and voting that takes place, etc. In addition, the facilitator
also provides general support to the group and helps them to use the system.
5) Supports all Phases of the Decision Making : It can support all the four phases of decision
making, viz intelligence, design, choice, and implementation.
6) Supports Positive Group Behavior : In a group meeting, as participants can share their ideas more
openly without the fear of being criticized, they display more positive group behavior towards the
subject matter of the meeting.
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Advantages of Group Decision Support System (GDSS):
1) More Information in Less Time : It is possible to gather huge amount of information
in a very short time period as GDSS facilitates the members of the team to work parallel.
2) Greater Participation : The risks associated with conformity pressure and groupthink
is greatly decreased when the members of the group work in a GDSS because the members
are able to express their thoughts freely.
3) More Structure : In a GDSS environment the discussions are much more concentrated
and focused. Irrelevant degradations are greatly reduced.
4) Automated Documentation : Comments are preserved forever and the system provides
the result without any delay. Excellent graphics makes viewing more attractive.
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34. Disadvantages of Group Decision Support System.
1) Cost : A significant amount of cost may be associated with putting up the infrastructure
consisting of the room, network connectivity and the software.
2) Security : There are chances that information gets leaked to the peers by a low level
employee.
3) Technical Failure :The system must be properly implemented to reduce the risk associated
with loss of connectivity and power loss. It is highly dependent on LAN/WAN infrastructure
and bandwidth.
4) Less Participation : If the members get frustrated they might participate less.
5) Training Expense :There is variation in the learning curve of the user in various situations.
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Executive Information System (EIS)

35. 4. Executive Information System (EIS)
EIS is an information system based on computer which generally
serves the information needs of the top level management of an
organization.
EIS can also be used to make decision just like Decision Support
System. EIS helps management to monitor performance of the
organization and thus helps organization to achieve its goals and
objectives in the long run. With the introduction of Artificial
Intelligence, EIS has lost its importance to a little extent.
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APPLICATIONS OF EIS
● MANUFACTURING: It determines whether a process is running correctly or not. It
helps in ensuring proper quality control of finished goods. It measures the actual
process time and compares with the standard time required for the process. It provides
management with daily production report, daily consumption report, safety stock report,
economic order quantity, etc.
● FINANCIAL: Every organization needs to ensure financial activities are running
sound. EIS may help to analyze whether payment has been realized from creditors
within stipulated period of time. It can help management in managing various other
sources of finance.
● ACCOUNTING: It helps in proper accounting and disbursement of accounting
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38. ADVANTAGES OF EIS
● EIS is easy for use and saves time of the top level
management of the organization.
● EIS provide access to timely information in a rapid manner.
● EIS provides extensive online analysis tools.
● EIS can easily be given a DSS support.
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DISADVANTAGES OF EIS
● System dependent
● Information overload for some managers
● High implementation costs
● System may become slow, large, and hard to manage
● Need good internal processes for data management
● May lead to less reliable and less secure data
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39. Experts System:
● 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.
● Expert systems are most common in complex problem domain and are considered as
widely used alternatives in searching for solutions that requires the existence of specific
human expertise. The expert system is also able to justify its provided solutions based on
the knowledge and data from past users.
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Experts System:
● 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.
● Expert systems are most common in complex problem domain and are considered as
widely used alternatives in searching for solutions that requires the existence of specific
human expertise. The expert system is also able to justify its provided solutions based on
the knowledge and data from past users.
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41. ADVANTAGES OF ES
1. Providing consistent solutions – It can provide consistent answers for repetitive decisions, processes and tasks. As
long as the rule base in the system remains the same, regardless of how many times similar problems are being tested,
the final conclusions drawn will remain the same.
2. Provides reasonable explanations – It has the ability to clarify the reasons why the conclusion was drawn and be
why it is considered as the most logical choice among other alternatives. If there are any doubts in concluding a certain
problem, it will prompt some questions for users to answer in order to process the logical conclusion.
3. Overcome human limitations – It does not have human limitations and can work around the clock continuously.
Users will be able to frequently use it in seeking solutions. The knowledge of experts is an invaluable asset for the
company. It can store the knowledge and use it as long as the organization needs.
4. Easy to adapt to new conditions – Unlike humans who often have troubles in adapting in new environments, an
expert system has high adaptability and can meet new requirements in a short period of time. It also can capture new
knowledge from an expert and use it as inference rules to solve new problems. 81
DISADVANTAGES OF ES
1. Lacks common sense – It lacks common sense needed in some decision making since all the decisions made are
based on the inference rules set in the system. It also cannot make creative and innovative responses as human experts
would in unusual circumstances.
2. High implementation and maintenance cost – The implementation of an expert system in business will be a
financial burden for smaller organizations since it has high development cost as well as the subsequent recurring costs
to upgrade the system to adapt in new environment.
3. Difficulty in creating inference rules – Domain experts will not be able to always explain their logic and reasoning
needed for the knowledge engineering process. Hence, the task of codifying out the knowledge is highly complex and
may require high
4. May provide wrong solutions – It is not error-free. There may be errors occurred in the processing due to some
logic mistakes made in the knowledge base, which it will then provide the wrong solutions.
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