MMPC – 008

Information Systems
for Managers
Indira Gandhi National Open University
School of Management Studies

Block

2
INFORMATION SYSTEMS
UNIT 5
MIS and Control Systems 65
UNIT 6
Information systems Economics & Security 82
UNIT 7
Transaction Processing Systems, DSS,
and EIS 98
UNIT 8
Integrated Applications 129
BLOCK 2: INFORMATION SYSTEMS
Unit 5: MIS and Control Systems enables you to comprehend the evolution
of MIS and understand the main features of a Management Information
System (MIS). You will be able to have an idea about the development
of MIS and its role at various management levels in an organization. The
unit illustrates Anthony and Simon framework for understanding the MIS
and decision-making process. You will be competent enough to appreciate
different viewpoints regarding applications of MIS in organizations. Also
you will understand about system vulnerability, control mechanism and
requirement of auditing.
Unit 6: Information systems Economics & Security begins with valuing
the growing need for information. It reveals the relationship between data
and information, information and knowledge. You will be familiar with the
concepts like cost and value of information, ethics in information security,
right to information and how to protect the information systems. The unit
finally portrays the main reasons for success and failure of an MIS.
Unit 7: Transaction Processing Systems, DSS, and EIS facilitates you to
comprehend and conceptualize about transaction processing systems (TPS),
decision support systems, executive information systems with various
illustrations about TPS with required inputs processing and desired outputs
at various levels from the respective systems. You will understand about
the decision making process. This Unit also brings to you the differences
between MIS, DSS, and EIS..
Unit 8: Integrated Applications entails discussion on importance of
integrated systems, their increasing use in organizations with advantages
of using them. Illustrations have been provided here in this Unit of some
business solutions of integrated systems by big players like Microsoft, SAP,
Oracle. Business utility of integrated systems have been discussed too.
UNIT 5: MIS AND CONTROL SYSTEMS
Structure
5.1 Management Information Systems – An Introduction
5.2 Objectives
5.3 System View and Status of MIS in Organizations
5.4 Framework for Understanding MIS and its Role at Various
Management Levels
5.5 Organization and Information System-Two way relationship
5.6 MIS as Decision Assisting Tool
5.7 System Vulnerability, Abuse, and Auditing
5.8 Summary
5.9 Unit End Exercises
5.10 References and Suggested Further Readings

5.1 MANAGEMENT INFORMATION SYSTEM –

AN INTRODUCTION
The subject of Management Information System (MIS) has different
meaning for different people. MIS, initially, were built to process
transactional data of an organization and to produce regular reports. With
little more advancement the system generated a report in a suitable format
that created an impact on its user and provoked an action, a decision or an
investigation. Today, an information system has evolved to the stage where
they handle databases and secondary data available on the web to facilitate
decision-making. Accordingly, definition of MIS has also evolved. There
are many closely related definitions in use. The terms MIS is synonymously
used with terms the Information System (IS), the Information and Decision
System and the Computer based Information System.
The MIS is defined as an integrated system of man and machine for
providing the information to support the operations, the management, and
the decision-making function in the organization.
The above definition emphasizes an association between MIS and decision-
making. An application software that processes data, which is not used for
decision-making, cannot be called an MIS. For instance, a computer-aided
design system is not an MIS.
An MIS deals with information that is systematically and routinely collected
in accordance with a well-defined set of rules. In other words, data collection
is a planned activity for which resources are allocated and rules are defined.
The information provided by an MIS assists managers in planning,
organizing, staffing, coordinating, directing and controlling the operations
of an organization. The management experts have viewed these steps as
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Information Systems Management Control system. Figure 5.1 shows the relationship between
operations, planning and control.

Planning

Plan & Targets

Control

Corrective Actions
Operations

Figure 5.1: Management Control System

In any organization that has planned activities leading to the achievement

of the stated goals, there is always a control process in place that measures
progress towards these goals and enables the manager to deduct the deviations
from the original plan in time. It is the responsibility of the management to
take corrective actions before it is too late. The deviations may be due to
environmental changes or due to the mistakes made by people. An MIS
is concerned with planning and control. An MIS has large amount of data
as its integral part that is stored and managed by a data base management
system.
The exponential growth of information all around makes it necessary that
information is probably collected, stored and retrieved in various fields so
that it could be usefully exploited whether and when needed. The concern is
“What information does the manager need to manage effectively”? We are
interested in a system for providing the necessary management information.
MIS is a system that aids management in making, and implementing
decision. An MIS must have the following features:
1. It must be capable of handling voluminous data. The data as well as
transactions must be validated.
2. It must be able to perform operations on the data irrespective of the
complexity of the operations. Often time multi-dimensional analysis
is required.
3. An MIS should facilitate quick search and retrieval of information.
An MIS must support mass storage of data and information.
4. The information must be communicated to the recipient in time.
Moreover, the communicated information must be relevant.
5. The information system must always have internet link to dig out
related information and data from the web for better analysis helping
the management in taking decision.

5.2 OBJECTIVES
After reading this unit, you should be able to:
●● Identify the main features of a Management Information System
(MIS);
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●● Explain the Anthony and Simon framework for understanding the MIS and Control Systems
MIS and decision-making process;
●● Explain the basic overview of the systems concept;
●● Describe the management functions at various levels in the context of
relationships between management and informational needs;
●● Use MIS as a technique for making programmed decision;
●● Explain the vulnerability of an information system; and
●● Discuss the control and audit structure required for an information
system.

5.3 SYSTEM VIEW AND STATUS OF MIS IN

ORGANIZATIONS
Today besides professional managers, all administrators, politicians,
academicians have become aware of the need for adopting an integrated
holistic perspective by using the systems approach to problem-
conceptualization and decision-implementation. Today we find everyone
talking of systems - the transport system, educational system, healthcare
delivery system, defence system, economic system, communication system,
management information system, transaction processing system, decision
support system, computer systems, etc. But what exactly do we mean by a
system? Let us elaborate to know about.
What is a system?
It is an entity; conceptual or physical, which consists of interdependent parts
or components. It is this interdependency which is characteristic of the parts
of the system. A system is a complex of elements or components directly
or indirectly related in a casual network. This brings in the notion of some
type of feedback and control to see whether or not the system is a position to
achieve the goals/purpose/objectives of the system. Any system must have
an objective or a set of objectives or a hierarchical set of objectives. In a
large context, a system is an assembly of procedures, processes, methods,
routines techniques etc. united by some form of regulated interaction to
form an organized whole. In fact no system, unless it be a totally closed
system, can exist in isolation.
A system is made up of sub-systems, which may be composed of further
sub-systems. We could carry on this refinement till we arrive at the so-
called ‘black box’ level, which is some perceptible manageable level. Just
as system is made up of sub or sub-sub-system, it itself is part of a super or
supra system. This could be termed as the environment in which the system
operates.
We can graphically depict the above narrative description in the form of
Figure 5.2 below. Let us give an illustration in the context of Figure 5.2. One
could think of an industrial system or a factory system. A factory system
has various sub-systems like the production sub-system, the shipping
sub-system, the financial sub-system, the marketing sub-system and the
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Information Systems personnel sub-system. Now a production sub-system could consist of sub-
sub-systems of production control, materials control, quality control etc.
the materials sub-sub-system can be further broken down into ‘black boxes’
say purchasing, stores, transportation etc. In turn, the factory system is part
of the larger economic system of the country which would be the so-called
superior or supra system.

Super or Supra System

The System under

Other Systems
consideration

Sub system - 1 Sub system - 2 Sub system - N

Sub Sub System

SSS - 2 SSS - M
(SSS – 1)

Black
BB - 2 BB - Q
Box BB-1

Figure 5.2: Hierarchy of Systems

Activity A
Think of at least three examples in the context of the Figure 5.2
…………………………………………………………………
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Let us have another example in the context of Figure 5.3 below. Data could
be a set of input into a data processing, which would process/transform/
convert the data into output or information. One could think of raw material
entering as input into production system, which is converted/transformed or
processed into an output i.e. some final product.
Basic Systems Module

Processor/ Set of
Set of
Transformer/ Outputs
Inputs
Converter

Figure 5.3 (a)

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 Boundary wall Environment MIS and Control Systems

Input Output
Adjusted
Processor

Measured output
Information (MOI)

MOI

Comparison Control
Effector of MOI & STD Module

STD

Standard Norm/
Budget
Information

Figure 5.3 (b)

Activity B
In the context of Figure 5.3, give at least three examples mentioning the
inputs, the processor, and the set outputs.
Input Processor Output
……………………………………………………………………………
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……………………………………………………………………………

Top
Management

Policies Plans Budgets Objectives

Revenue Costs Profit

Middle Management

Schedules Measurements

Goods Services Performance

Operating Management

Figure 5.4: Interaction of Management Levels

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Information Systems Continuing the example further in the context of Figure 5.4 this time, the
quality of the finished product could be measured by comparing it with the
standard specifications of the finished product. Depending on the deviations
or variances the manager can then adjust the quality and quantity of the
raw materials. The environment of the factory system under consideration
could be other factories, competitors, customers, markets, sociopolitical
and cultural factors, government etc.
Information systems are used in all functional areas and operating divisions
of business. In finance and accounting, information systems are used to
forecast revenue and business activity, determine the best sources and
uses of funds. Information systems have been used for managing cash and
other financial resources, and analyzing investment. Financial health of an
organization is also checked using IS. In sales and marketing, information
systems are used to develop new goods and services (product analysis),
determining the best location for production and distribution facilities (site
analysis), determine the best advertising and sales approaches (promotion
analysis) and set product prices to get the highest total revenues (price
analysis).
In manufacturing, information systems are used to process customer
orders, develop production schedules; control inventory lends and monitor
product quality. Service industries such as airline industry and railways
use information systems to serve their customers better. Banks and other
investment firms’ use IS to make good investments and sanction sound
loans. Publishing houses, healthcare organizations, and retail companies
all make use of information systems to serve their customers better and
maximize their profit.
Activity C
Detail some functional MIS systems in your organization or any organization
of your choice. What are their distinguishing characteristics? Why are they
failures or successes?
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5.4 FRAMEWORK FOR UNDERSTANDING

MIS AND ITS ROLE AT VARIOUS
MANAGEMENT LEVELS
There is too much data and information in an organization. In order to design
a MIS successfully, we need a framework to structure the information so
that the data and information relevant for decision-making can be separated
from rest of the data. Before we talk about the design of MIS, let us
understand the strategic management of a business. An organization must
respond to market forces, competition, to environment and to technological
changes. The scope of business is wide, touching many fronts. A business,
among other activities, must do a long-term strategic planning. There are
many methodologies for strategic planning. According to model presented
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by Robert Anthony, the strategic planning is one of the major activities in MIS and Control Systems
business planning and control. The other two are the management control
and operational control. This framework is illustrated in Figure 5.5.

Strategic Planning

Planning and
Management Control
Control System

Operation Control

Figure 5.5: Framework of business planning and control

1. Strategic Planning is the process of deciding objectives of the

organization, determining the possible shift in objectives, deciding
on the resources used to attain their objectives and the policies that
govern the acquisition, use and disposition of their resources.
2. Management Control is the process by which managers assure that the
resources are obtained and used effectively and efficiently to attain
the objectives of the organization.
3. Operational Control is the process of assuming that specific tasks are
carried out effectively and efficiently.
It is useful to classify the above definitions with some examples. The
table below gives instances of planning and control activities in different
functional areas.
Table 5.1: Planning and Control Activities in Different Functional Areas
← ACTIVITIES →
Functional
Areas Strategic Management Operational
Planning Control Control
Production Location of a new Determine the product Scheduling specific
factory mix for a monthly jobs on specific
production program machines in a shift
Marketing Entering the export Media planning for Planning sales
market advertising expenditure contacts to be made
by a salesman in the
next week
Finance Raising capital by Determining maximum Determining what
issuing new shares levels of credit for action to take against
customers nonpayment by a
specific customer
Personnel/ Deciding on Determining who will be Determining which
HR changes to be made promoted to fill a vacated workers will be on
in the organization post at middle and lower each shift.
structure levels, in the organization.

Anthony’s framework enables us to understand the characteristics of

information needed to support the three types of planning and control
process. The table 5.2 below depicts these characteristics and highlights

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Information Systems the substantial differences in information required for strategic planning,
management control, and operational control.
Table 5.2: Differences in Information required for three types of Planning
and Control Processes
S. Information Strategic Management Operational
No. Characteristic Planning Control Control
1 Volume Low Intermediate High
2 Level of Aggregation High Intermediate Low
3 Frequency of use of a Low Intermediate High
particular type of data
4 Currency requirement Low Intermediate High
5 Accuracy Low Intermediate High
6 Scope Wide Intermediate High
7 Source Significant amount Mostly Internal Entirely
from external sources Internal
8 Predictability with user Low Fairly High Very High
9 Variability with user High Intermediate Low
10 Distance of user (in Fair Fairly close Close
Organizational terms)
from sources within
organization
Let us now look at Simon’s framework that has broken down the process
of decision making into three stages:
1. Intelligence: This is the stage in which the decision maker recognizes
that there is a problem or opportunity that requires him to make a
decision.
2. Design: The decision maker determines the alternatives that are
available to him to resolve the problem or exploit the opportunity.
3. Choice: In this stage, an alternative generated in stage-2 is singled out
to be pursued. The selection process may involve feasibility analysis
or cost-benefit analysis.
With this framework, we can distinguish between three major classes of
decisions.
a) Programmed Decisions are there in which all stages are handled
by following a preset well-defined procedure. The decisions are
repetitive and routine which arise often and are capable of being
modeled mathematically in their entirety. The classic example would
be inventory-ordering decisions.
b) Non-programmed decisions are difficult to structure in logical-
mathematical terms. These decisions cannot be handled in well-
defined and pre-specified procedures. There opportunities are not
repetitive in nature and they require fresh intelligence, design and
choice phases to be executed. An example would be the decision to
set up a new factory or launch a new line of product.
c) Semi-programmed decisions are those in which at least one and no
more than two of the above stages can be handled by well-defined
preset procedures. An example where the intelligence phase is
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 well structured would be the diverse kinds of variance analysis. A MIS and Control Systems
comparison with a budget or standard is undertaken in a well-defined
way to signal the need for a decision. Subsequent stages of design and
choice, however, are not handled by a set procedure.
Recall that an MIS supports problem-specific decision-making. Depending
on the framework used by the organization for decision-making and goal set
for MIS, the designer should determine the information needs.
An MIS should not automate the existing procedures. MIS should act as a
catalyst of change in the processes of an organization. For instance, a private
bank sanctions loans by using a sequential process. An applicant applies for
a loan, the details provided by him are verified, and his application details
are entered into the bank application format along with his credit limit. The
computer application is then passed on to the loan sanctioning authority.
The process takes two weeks time even though the staff spends about thirty
minutes on the application. A workflow system should not automate the
existing process. It should aim to reduce the application processing time
to less than a week. The present workflow systems let everyone look at the
application simultaneously and each concerned person adds his feedback.
The sequential process has been changed to a parallel process. The total
time has come down to less than a week.
According to Zani, the important determinants of MIS design are:
1. Opportunities and risks
2. Company strategy
3. Company structure
4. Management and decision-making process
5. Available technology
6. Available information sources.
An MIS should be designed, viewing the organization. A company’s structure
sub-divides essential tasks to be performed, assigns them to individuals, and
spells out the interrelationships of their tasks. The organizational structure
and the tasks determine the information needs of the company.
The MIS designer must plan to deliver reports in line with the organization
structure. This means that the main decision makers and the power centers
must be recognized in the MIS. If the decision-making responsibilities are
clearly defined and allocated in the organization, MIS must capture them.
If the organization culture provides sufficient incentives for efficiency and
results, the MIS support this culture by providing such information, which
will aid the promotion of efficiency.
The organization system is an open system and MIS should be so designed
that it highlights the changes to the concerned level in the organization so
that the action can be taken to correct the situation.
The designer of the MIS should take care of the data problems. The input
data to the MIS may contain bias and error. The inputs to the MIS must be
controlled to ensure impartiality, reliability and consistency.
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Information Systems If the organization culture provides sufficient incentives for efficiency and
results, the MIS should provide information that will aid the promotion of
efficiency.
If the organization is an open system then MIS should be designed to
highlight critical changes in the system or in its environment.
In designing an MIS there are two types of situations one may come across.
If the organization has no experience of computing applications, which
will create the maximum impact on the organization, it can be identified
by using Zani’s framework. Key success variables are however seldom
obtained through a questionnaire survey of managers. Data on environment,
past company performance must be analyzed and discussed to identify key
success variable. It is sometimes useful to pen down a quantitative measure
of such variable. For example the performance of a textile unit can be
summed up through two indicators: contribution per loom shift and fixed
cost per loom shift. Similarly the performance of a shipping company may
be measured as gross operating profit per day per voyage. Precise definitions
of performance indicators enable the analyst to understand and quantify the
likely impact of improvement in different task of planning and monitoring.
An analysis of the company’s key success variables can be done only after
a thorough understanding of the company’s operations. Consultants and
vendors who do not spend adequate time in understanding the operations
are unlikely to throw up application areas, which will create the maximum
impact. They are likely to suggest “off-the-shelf” applications. One should
use standard software, which is available for such applications.
For a company getting into automation using information system, a list
of applications would have to be generated, keeping in view the future
perspective, a least for five years, on the basis of which a suitable configuration
would be decided. However the development and implementation of the
applications would have to be done in a phased manner. The first few
applications must be those, which can create an impact on the performance
of the organization, are quick to implement with the least amount of changes
in the existing procedures and systems.
By and large an effort is made to create useful databases, which capture data
during the execution of routine data processing systems. Such data are then
analyzed to produce periodic planning report for monitoring.
Examples of such systems are the sales analysis based on invoice processing;
inventory control based on stock accounting; costing and profitability
analysis on the basis of financial accounting system. Marginal additions to
data fields, new coding structure, and revised procedures are introduced to
make the data base and reporting more useful.
Factors Facilitating Implementation of MIS
A few factors, which will increase the chances of a successful implementation
of MIS, are:
1) Involvement of top management in the computerization effort, in
defining the purpose and goals of computers within the organization.
2) Selection of an IT Manager who is well versed with IT tools and
also has the skills to involve managers in choosing application areas,
identifying information needs and designing reports.
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3) A computer staff, which has interdisciplinary skills in computers, MIS and Control Systems
management, and operations research.
4) A balanced expenditure on hardware and software.
Now let us look into the role of MIS at various management levels. We
come across saying that management can be understood by observing what
managers do. Management can also be understood by the type of functions
a manager performs. A manager usually performs the following functions:
planning, organizing, Staffing, Directing, Coordination, Feedback,
Reporting and Budgeting. In fact management is a process of achieving an
organization’s goal and objectives by judiciously making use of resources
of men, material, machines, money, methods, messages and moments (the
last two in the context of information being vital resources to the manager/
decision-maker).
Management can also be seen as structured into three hierarchical levels
namely, top level, middle level and bottom level or strategic, tactical and
operational levels, respectively. Although lines of demarcation are not
absolute and clear-cut, one can usually distinguish certain layers within the
organization, which are characterized by, the classical pyramidical type of
structures as shown in Figure 5.4. Top management establishes the policies,
plans and objectives of the company as well as a budget framework under
which the various departments will operate. These factors are promulgated
and passed down to middle management. They are translated into cost
or profit centre concept. These are reviewed, analyzed and modified in
accordance with the overall plans and policies until agreement is reached.
Middle management then issues the specific schedules and measurement
yardsticks to the operational management. The operational levels has the
responsibility of producing goods and services to meet the revenue, profit
and other goals, which in turn will enable the organization achieves its
overall and objectives.

Planning Planning
Control Org.
Org. Sta
Sta ffin
ffin g
Control g Coord.
Co
ord
.

Top Level Bottom Level

Planning
Org.
Sta
ffin
Control g
Co
ord
.

Middle Level
Figure 5.6: The Allocation of Managers’ Time
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Information Systems The hierarchical view of management is important for two reasons:
information needs tend to be different at different levels of management
and the amount of time devoted to any given function varies considerably
with the level as can be seen in Figure 5.6. The job content at various
management levels is further elaborated in Table 5.3.
In the context of MIS, management can perhaps be best defined as a
process of (i) selection of objectives (ii) judicious allocation of resources
(iii) determining operational plans and schedules (iv) keeping control of
progress and (v) evaluation through feedback. Each of these areas requires
certain decisions to be made.
Thus we take strategic decisions at the top level, tactical decisions at the
middle and operational decisions at the junior level. As can be seen from
Table 5.3, the type of problems and decisions at the junior level are quite
deterministic and structured, so we can have programmed decisions.
Table 5.3: Job Content of Management Levels
S. Character Top Middle Operating
No. Management Management Management
1 Focus on Heavy Moderate Minimum
Planning
2 Focus on Control Moderate Heavy Heavy
3 Time Frame 1-5 years Up to 1 year Day to Day
4 Scope of Activity Broad Entire functional area Single sub-
function
5 Nature of Activity Relatively Moderately Highly
6 Level of Very Complex, Less complex, better Straightforward
Complexity many variables defined variables
7 Job Measurement Difficult Less Difficult Relatively Easy
8 Result of activity Plan, policies Implementation, End-product
& strategies schedules,
performance
yardsticks
9 Type of External Internal, reasonable Internal,
Information accuracy historical level
utilized of accuracy
10 Mental Attributes Creative Responsible, Efficient,
innovative persuasive, effective
administrative
11 Number of People Few Moderate number Many
Involved
12 Department/ Intra-division Intra-division, Inter Intra-
Divisional dependent department
interaction
Source: J.Kanters-”Management Information Systems”, Prentice Hall: Englewood Cliffs
Through the classic pyramidical structure is generally acceptable;
unfortunately in the modern complex organization this neat, militaristic,
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configuration seldom (!) fits the reality. The modern manager must be MIS and Control Systems
capable of managing his/her information systems for strategic planning,
management control, and operational control.
Activity D
Can you visualize MIS without computers? Justify your answer.
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5.5 ORGANIZATION AND INFORMATION

SYSTEM – TWO-WAY RELATIONSHIP
A system is an assembly of elements arranged in a logical order to active
certain objectives. An organization is also a system. H. J. Leavitt advocates
that an organization should be viewed as a socio-technical system consisting
of people, tasks, technology, culture and structure. The modified Leavitt’s
model is shown in the Figure 5.7 below:

Tasks

People Structure
Goals

Technology Culture

Figure 5.7: An organization as a socio-technical system

An organization is an open system that has the capacity to adjust itself to

the changing environment. The goals of an organization change in response
to the changes in organization or in its environment. The organization must
change as system to stay in tune with the goals.
MIS should be designed viewing the organization as a system. MIS design
should give due weightage to the human side of the organization and its
culture. MIS should be designed to give reports to main decision maker. In
other words, the designer must study the organization structure and identify
the power centers.
In a tall hierarchy with a high degree of centralization, the MIS should give
control information to the higher management.
If the organization is structured on a functional basis, then the MIS should
have a functional design.
If the organization works on a standardized system where rules, policies,
systems and procedures have been laid down, then there become part of the
MIS.
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Information Systems
5.6 MIS AS DECISION ASSISTING TOOL
We have studied above that Simon’s Model divides decision-making into
three phases - Intelligence, Design and Choice. In the intelligence phase,
potential problems and opportunities are identified. In the design phase,
alternative solution to the problem is developed. In the choice stage, a
course of action is reflected.
In certain cases, the decision can be made using a rule, procedure or
quantitative method. Such problems are known as structured problem. For
example, an organization may decide to place a purchase order for every
purchase requisition without worrying about merging them. Such decision
can be easily programmed. The organization may have a fixed re-order
point and fixed re-order quantity irrespective of demand. Automated system
such as transaction processing systems and MIS are often used to handle
programmed decisions. Such systems generate reports for concerned people
so that they can take action. The decision taken is known as ‘Programmed
Decision’.
If the problem is unstructured, the solution cannot be arrived at using a
set of rules or procedures. The rules and procedures, at best, can help in
identifying alternatives. An information system that assists decision maker
in making a non-programmed decision is referred to as Decision Support
System (DSS). A decision support system usually has large amount of data
that is managed by a Database Management System. The DSS presents
various views of data to the decision maker to facilitate decision-making.
The views and reports may present details according to the needs of the
user. A user may prefer graph whereas another user may like to see data
in tabular form. A DSS is designed to provide presentation flexibility to its
users. Details can be rolled up or drilled down depending on the requirement.
For instance, sales manager of area A would be interested in knowing total
sales, details of each sub-area within the main area. The manager would also
like to know sales in area B, area C etc. to measure the relative performance.
The manager would not be interested in details of sub-areas of area B as C;
and will look down area A to get complete details.
DSS should provide facility to its user to perform statistical analysis of
data. The sales data, for instance, can be analyzed for identifying seasonal
fluctuations from regular demand change. It should also have provision to
dig out secondary data from web. There are whole lots of software packages
that can do amazingly good analysis of the data. Let us say, a company is
considering an investment in an IT Project. It can do a what-if-analysis
to analyze worst and best scenario. The expected cost and benefit can be
changed within limits to estimate pay back period.
These are situations when a closed form solution is not available. In such
situation a simulation model is constructed to gain insight. The model is
tested on large number of inputs. Sometimes, simulation is done to study
the behavior of system over a period of months in few days. A simulation
system assists manager decision-making.
A decision support system may help a manager in perform goal-seeking
analysis. In goal seeking analysis, you work backward starting with goal
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to arrive at conditions required to achieve that goal. For instance, you may MIS and Control Systems
allocate budget for inventory and then backward to figure cut the stock
level, re-order point, delivery time etc.
Ideally, one would like to have a DSS to help in decision making in every
situation. So far, no DSS has come close to being so general, perfect, and
useful at the same time. A DSS, in practice, is developed for assisting in
decision-making process for specific problems.

5.7 SYSTEM VULNERABILITY, ABUSE, AND

AUDITING
Due to the potential of information systems, they are under constant attack
from intruders and hackers. Unauthorized access to data and programs may
cost an organization a fortune. For instance, an individual may disclose the
stock levels of an organization to a potential buyer who may decide to go
to the competitor if he feels that you may not be able to fulfill the order
in time. In the world of e-Commerce, and internet easily accessible, one
mistake could cost a client enough to justify a lawsuit. To avoid, abuse of
information system, proper controls must be set. There are many threats to
information systems such as hardware failure, software failure, user errors,
software changes, theft of data, services, equipment, and telecommunications
problems.
Systems become vulnerable because of system complexity. Any disaster
has an extensive effect. System vulnerabilities differ from person to person.
●● User: Identification, Authentication, and Subtle Software Modification
●● Programmer: Disables Protective Features; Reveals Protective
Measures
●● Maintenance Staff: Disables Hardware Devices; Uses Stand-alone
Utilities
●● System Operator: Doesn’t Notify Supervisor, Reveals Protective
Measures, disables or changes the network setup etc.
It is better to think of all possible misuse and fraud from within the
organization and establish system control to prevent them. Such controls are
reformed to as deterrence controls. We next discuss some of these controls.
Entry of people who use the system should be monitored through biometrics
systems such as finger print identifier, retina scanner, voice entry. Smart
card identifiers and sanitization system also may be used.
The standard procedure such as well chosen passwords and different levels
of access are always put in place.
Any output generated should leave an audit trail to identify any misuse of
the reports. All transactions through the information system should have
proper audit trail.
The database management system provides mechanism to give different
level of access to different uses to protect data. With proper configuration
and use of encryption, the network misuse can be prevented.
An information system is like any other system in the organization. It must
be audited and reviewed to make sure that it is operating and being used
79
Information Systems as intended. The initial requirements and objective document serves as
a reference. The system is audited for its performance, use, cost, benefit
and other design criteria such as planned activity for which resources are
allocated and time frame is set. A planned review is time-driven that may be
done every 6 months or every year. The review must have a clear objective
and reviewers must produce a written report. The report must comment on
the following factors:
Objective: Is in tune with the organizational goal?
Hardware/Software/Network/DBMS: Are they being used as intended? Will
they be able to meet requirement for next few years? Is there any bottleneck?
Staff: Is staff sufficient and sufficiently trained? Are People controllable
using the system? In case of any skill gap because of version changes in
systems, proper training must be provisioned to bring the staff at the current
level of the updated system.
Safety: Are enough controls present to ensure safety? Are the controls
working effectively?
Cost Benefit: This is one of the key reasons for taking up review activity.
This is also the most difficult part of the review process. The reviews should
try to be as objective as possible.

5.8 SUMMARY
This unit has given you a fair understanding of the main feature of a
Management Information System in Organizational Context, describing its
various functions, importance and relationship with planning, control and
operations in an organization i.e. what an MIS is and what it is not.
Further, the unit systematically leads you to the prevailing status of MIS
in organizations, discussing the ever growing need of information and
its proper handling (processing), which in turn led to the development of
MIS and advent of computers therein to cope with the hazards faced in
coordinating and managing the organizational challenges. We have also
discussed different viewpoints about the MIS given by same management
scientists.
In this unit, we have learnt the basic structure of an information system. We
also learnt the MIS as an organizational unit within an organization. MIS
and its role at various levels of management were also discussed. MIS is
used for making programmed decision as well as in assisting the decision
making process. The information system is vulnerable and it can easily be
abused. An information system requires a control structure and it needs
regular audits.

5.9 UNIT END EXERCISES

1. Define MIS. What are the main features of an MIS?
2. What are the functions that MIS supports in an organization?
3. What is Simon’s framework for decision-making? How does it help in
MIS design?
4. What are the determinants of MIS design according to Zani?
80
5. Explain the following statement, “there is a two way relationship MIS and Control Systems
between organization and Information Systems”.
6. Discuss fully the purpose of an information system.
7. “In the end, the information system is recognized only as a foundation
for human judgment, insight and inventiveness”. Discuss.
8. What impact does the implementation of programmed decision-
making have on the management system of an organization?
9. Compare and contrast programmed decision making information
system and decision assisting information system.
10. What are different types of controls and audits required for an
information system?

5.10 REFERENCES AND SUGGESTED FURTHER

READINGS
Davis, G.B., MIS Conceptual Foundations, Structure and Development,
McGraw Hill: New York.
Jawadekar, W.S., Management Information System, Tata McGraw Hill
Publishing Company Ltd.
Kanter, J., Management Oriented MIS, Prentice Hall Inc: Englewood-Cliffs.
Zani, W.S., “A Blue Print for MIS”, Harvard Business Review.

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 UNIT 6: INFORMATION SYSTEMS
ECONOMICS AND SECURITY
Structure
6.1 Introduction: Growing Need of Information
6.2 Objectives
6.3 Data, Information and Knowledge
6.4 Value and Cost of Information
6.5 Ethics in Information Society and Right to Information
6.6 Protecting Computer Resources and Disaster Recovery
6.7 Information Systems: Success and Failure
6.8 Summary
6.9 Unit End Exercises
6.10 References and Suggested Further Readings.

6.1 INTRODUCTION: GROWING NEED OF

INFORMATION
Maintaining records for use, as and when, has been in practice right from
the ancient times. Initially people were required to keep record of their
possession so that governing body could take tax from them. Government and
traders kept records to plan their activities better. With the industrialization,
it became necessary for industry owners and managers to keep records
of inventory and accounts. Management needed more information for
internal decisions. Investors, on the other hand, needed information about
the organizations, its soundness, and health. In spite of the technological
developments, there is an ever-increasing demand for more and more
information.
Information and Information Technology have become a strategic
necessity. The business environment has become much more competitive.
It has become mandatory on the part of the organizations to make full use
of information with the help of technology to service. In an organization,
information and technology exist in the form of an information system.
Whenever, an external or internal demand is anticipated or felt by the
organization, information system (IS) helps the organization to plan critical
response activities. The individuals are supported by IS to fulfill their roles.
The organizations use IS to track consumer behavior. With the availability
of technology, even in the form of hand held smart devices, it has become
possible to disseminate information at any time in case organization has
IS in place. The organization may take proactive measures rather than
firefighting measures based on the information provided.
Typical scenario in an organization is closer to what is shown below in
Figure 6.1

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 Information systems
Economics and Security
Level I

Level II

Level III

Level IV

Figure 6.1: An organization as a hierarchical unit and hierarchical

communication channels

At Level I is the owner i.e. Chief of the organization or top level management,
Level II has middle management, Level III is lower level management and
at level IV are the workers.
With increased size of organization, the volume of data generated within the
organization also increased and IS became a necessity for rational decision-
making by providing information at all levels by extracting from the pile of
data.

6.2 OBJECTIVES
After reading this unit, you should be able to:
●● Define data, information, knowledge and relationship between them;
●● Explain the concepts like cost and value of information;
●● Illustrate the main reasons for success and failure of an MIS;
●● Describe ethical issues involved in information society and right to
information; and
●● Explain the need and mechanism to protect and safeguard computer
resources from unauthorized access, computer viruses, and
cybercrimes.

6.3 DATA – INFORMATION - KNOWLEDGE

Data is raw material with which we start and information is the finished
product. For example, look at the following links:
1234 5000.00
2345 7000.00
3456 4500.00
2571 8000.00
Above lines just contain data as there is no meaning associated. Let us now
put the data in the proper context as follows:
Account Number Money Withdrawn on a day
1234 Rs. 5000.00
2345 Rs. 7000.00
3456 Rs. 4500.00
2571 Rs. 8000.00
Total Rs.24500.00
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Information Systems The data is now usable and we can process it to extract information such
as the amount withdrawn from account number 1234 is Rs. 5000.00. We
can consolidate the data and extract the information that 24500.00 Rs. were
withdrawn on the day.
Information has been defined as
Data that have been put into a meaningful and useful context and
communicated to a recipient who uses it to make decisions it reduces
uncertainty, reveals additional alternatives or helps eliminate irrelevant or
poor ones.
Returning back to our example, the bank manager may decide the amount
of required cash based on the information of total money withdrawn.
The information makes a person more knowledgeable. Knowledge is an
awareness and understanding of a set of information that help decision-
making. Knowledge makes a person wise. The sequence is the following –
Data is processed to get Information; Information makes a person
Knowledgeable, Knowledge so created adds to the Wisdom (abbreviated as
DIKW). This is the relationship between DIKW.
The information should have certain characteristics to be valuable to
its recipient. These characteristics vary from being accurate to secure.
If information is not accurate, the decision maker may not rely on the
information. The situation becomes worse if the recipient of the information
is not aware of its inaccuracy. The decision maker may use inaccurate
information assuming it to be accurate. The following is a comprehensive
list of desired characteristics:
1. Accurate: The information should be accurate and error free. The
information may be inaccurate due to incorrect data that has been
used to generate information. The data may be inaccurate due to
human error. This is commonly referred to as garbage-in-garbage-out
(GIGO).
2. Complete: The information must be complete. The information
should not have been filtered that presents a biased picture to the
recipient. Let us say, salespersons of organizations are reporting sales
information to the sales manager. The sales they make for the month
of July are exceptionally low. They delete this information from their
report whereas the sales manager might be interested in July sales
just as much as in other month’s sales. He might even be aware of the
reasons for the low sales and might be planning to boost sales in July.
The incomplete information may be useless for him.
3. Economical: We all understand that information has an associated
cost and it is expected to be beneficial for the recipient. The benefit
must be much greater than the cost.
4. Flexibility: Let us understand flexibility through an example. In a
bank, the bank manager would like to know the total amount withdrawn
and deposited through transactions, loans given and recovered by the
bank. A client would like to check the total money he withdraws from
his account and his present balance. The information that the bank
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 possesses should be flexible enough to present different views of data Information systems
to different people. Economics and Security

5. Reliable and verifiable: Information is said to be reliable if one

can depend on it. Both, data and information should be reliable. In
case, there is any doubt or the user wants to be absolutely sure, he
might like to verify.
6. Relevant: This Characteristic is self-explanatory. No one would like
to have irrelevant data or information.
7. Simple: The information must be presented in proper format to make
it simple for user. Too much information may result in information
overload. The user may not be able to extract important information.
8. Timely: The information may loose its value if it is not received in a
timely manner. Imagine reading yesterday’s newspaper today.
9. Accessible and secure: The information should be easily accessible
to authorized persons. At the same time, the information should be
secure from unauthorized users.
To summarize, information is the result or product of processing data as
depicted below.

Data Processor Information

Data life cycle:

We can think of data having their own life cycle namely, data generation, data
manipulation, transmission of data (and communication of information),
storing/retrieving, archiving/purging and reproduction of data.
The generation of data could take place internally and/or externally. This
data has to be captured by recording of data from an event or occurrence in
some from such as sales slips, personnel forms, purchase order etc.
Stored data would have to be retrieved by searching out and gaining access
to specific data elements from the medium where it is stored.
Retrieved data may be converted or reproduced to different form or
presentation format by way of documents reports etc.
Data are also constantly transported to the user in processed from. It is
transferred to storage from the source, then processed and passed on to the
user, who again returns it to storage after working on it, which becomes
available for further retrieval.
The randomly accumulated data has to be sorted and classified to reveal
appropriate information. For example, sales data can be classified product-
wise, territory-wise, salesperson-wise etc. Such a classification will give the
sales data more meaning.
Processing of data might entail quite a bit of manipulation and calculations
involving addition, subtraction, multiplication, division etc. based on
certain formulae. Computations might have to be performed for deriving
employee’s pay, customer’s bill, financial ratios, hospital bills, insurance
claim etc. Management science/operational research models might be used
85
Information Systems for determining optional product mix, aggregate planning, and economic
order quantity determination.
Data stored must be utilized on some occasion by some one at some point
of time; otherwise there is no point in storing it. When data is finally put in
a usable form it can be retrieved and turned into information at appropriate
time for decision-making.
It is important to destroy data following its evaluation for use in future.
Destruction/purging of data records may be accomplished on a purely routine
basis following one time use or may occur in review of old records. This
is done by following the organization’s policy. Destruction is the terminal
stage or the end of the data life cycle. The data life cycle is portrayed in
Figure 6.2:

Store Retrieve

Sort

Evaluate
Generate for future Manipulate Utilize
use

Synthesize

Destroy

Figure 6.2: Date Life Cycle

Broken lines in above Figure indicate that unusable data should be destroyed/
purged.

6.4 VALUE AND COST OF INFORMATION

The value of information is measured in terms of benefits to the organization.
The benefits may be tangible that can be easily quantified. For example, 5%
increase in sales is a tangible benefit, which corresponds to ,say, Rs. 50,000.
If the cost of the information that led to this additional profit is Rs. 20,000
then the value of the information is Rs. 30,000. Sometimes, the benefits may
be intangible and cannot be easily quantified. For instance, the information
may help consumers to connect to a company better. The employees may
feel respected in an organization if more information is shared with them. In
both the cases, the attrition rate will decrease and the corresponding benefit
cannot be directly measured in terms of financial benefit to the organization.
For using information to its advantage, organization develops an information
system. However before developing the system, a cost/benefit analysis
is done to figure out net benefit of the system. There are many methods
to assess value of information system. The most commons are explained
below.
1. Cost-benefit analysis:
IT projects require investments in advance, before getting its outcomes.
Many times it becomes difficult for organizations to take decisions on
such investments. Over the years, however, it is clear now about the
advantages of information and hence the need for the IS. Now a days
86
 IT projects are less risky provided all resources including the human Information systems
resource are well planned and put in place. Economics and Security

The Cost-benefit analysis method is comprehensive and explicit in

understanding the investment and gain out of it hence it is covered in
detail.
Identification of IT Costs
Earlier IT cost used to be so hard to estimate because of excessive
overhead. With the advancements in IT and availability of human
resources in much easier way than it used to be earlier the task has
become uncomplicated. There are options available for investments
on IT. Third party resources available, also through internet in terms
of Cloud services, has helped the organizations in setting up IT
infrastructure in simple way. One may go for establishments in phases
based on it’s preparedness of taking up the load and usability. The
Table 6.1 below gives the cost involved for the organization which
decides to establish its own IT infrastructure i.e. without hiring.
(a) Direct Cost
Table 6.1: Cost involved in IT

Environmental
Various items detail
operating cost
Servers
Computers and Printers
Hardware cost
Backup devices
Network and security equipments
Operating system
Software cost RDBMS
Networking and security software
Network wiring and configuration
Installation and
Security software configuration
configuration
In-house customizing time
costs
Re-engineering business process
Electricity, UPS, air-conditioning, printing paper,
Overheads
printer toner/ cartridges, disks and backup devices
Cost for preparing the workforce by training and
Training cost
re-training
Maintenance Yearly service contract for hardware
cost Software upgrades, and maintenance fee

(b) Indirect Human Costs

Indirect human cost is more significant than direct cost and it
is very illusive in nature. Following is the taxonomy of indirect
human costs:
● Management Time
87
Information Systems ● Management effort and dedication
● Employee Training, re-training and human resource
development
● Management Resources
● Personnel Issues
● Cost of ownership
● Employee Time
● Employee Motivation
(c) Indirect Organizational Costs
● Losses in productivity
● Organizational Productivity
● Strains on Organizational Resources
● Opportunity Cost and Risk
● Business Process Reengineering and integration of
services
● Covert Resistance
Identification of Benefits
The following are the potential benefits of an IT system:
● Reduced Head Count
● Reduced manufacturing cost
● Reduced inventory cost
● Reduced down time
● Better quality control
● Additional new customers
● Increased sales from existing customers
● Better image of the Organization
● Higher employee morale
● Reduced attrition rate
● The ability to recruit better employees
● Eliminate data duplicacy
This approach of doing cost-benefit analysis is known as Total Cost of
Ownership (TCO). The model attempts to include all costs including
direct and indirect costs of owing the information system. One can
include non-business uses of a computer system as a cost factor. This
model is versatile and gives you complete freedom to include any
relevant cost or benefits. It has been used to assess the net benefits
of owing a computer system. TCO, in many cases, has revealed
weaknesses of an information system in terms of under-utilization or
mismanagement of IS.

88
 Activity A Information systems
Economics and Security
Pick an information system that you have used and do a cost-benefit
analysis. Make educated guess for cost and benefit figures.
………………………………………………………………………
………………………………………………………………………
………………………………………………………………………
2. Return on Investment (ROI)
Another measure of IS value is return on investment (ROI). This
method tries to quantify additional profits that are generated as a
percentage of the investment in information system technology. For
an example, a manufacturing firm invested 5 Crore rupees in IS and
an additional benefit due to increased sales is 50 Lakh rupees, then the
return on investment is
50,000 1
=
5,00,000 10
1
In percentage it will be × 100 = 10%. In other words, the return on
10
investment is 10%. The company might perform this analysis before
installing the information system with an objective of determining the
utility of the system. The same analysis may be performed after the
installation to check the delivered benefits of the IS against expected
benefits.
3. Earning Growth
Another measure of IS value is the increase in earnings growth. Let us
say, an organization experienced 7% sales growth in year 2015. After
installing IS, the sales growth became 15%. Assuming that no other
factors affected sales, 8% increase in the sales are due to IS.
4. Market Share
Similar to earning growth one can also evaluate value of IS in
terms of increased market share. Organisational growth depends on
information and IS plays the role of backbone for the organization in
taking decisions.
5. Customer Awareness and Satisfaction
Customer satisfaction is one of the most valued intangible benefits
of an information system. In present days, when we have online
services by almost all organizations, IS helps customer track status
of their orders. Customer may check the stock status before he places
an order. All the leading companies that conduct survey on behalf
of their client company’s to determine the satisfaction level of their
customers.

6.5 ETHICS IN INFORMATION SOCIETY AND

RIGHT TO INFORMATION
While using IS everyone is supposed to follow ethics to refrain from
committing crimes by unauthorized use as unethical use could be devastating
89
Information Systems for the organization. To control such unauthorized use, countries have
predefined rules to be followed mandatorily. India being a leader in IT
industry, has IT Act which came up in the year 2000. It is widely known as
IT Act 2000. Further amendments have been made for better control. Use of
social media using the digital technology has also seen tremendous increase
in near past. Following information shows the number of social media users
only in India, in early 2021 –
WhatsApp users - 53 Crores (530 Millions)
YouTube users - 44.8Crores (448 Millions)
FaceBook users - 41 Crores (410 Millions)
Instagram users - 21 Crores (210 Millions)
Twitter users - 1.75 Crores (17.5 Millions).
With the increase in use of IT, whenever felt necessary the Government
of India issues guidelines through modifications in the IT Act. In February
2021, by modifying the IT Rules 2000 and 2011, Intermediary Guidelines
and Digital Media Ethics Code were notified. As per the Act, if any person,
without permission of the owner or any other person who is in charge of a
computer, computer system or computer network -
●● accesses or secures access to such computer, computer system or
computer network.
●● downloads, copies or extracts any data, computer data base or
information from such computer, computer system or computer
network including information or data held or stored in any removable
storage medium
●● introduces or causes to be introduced any computer contaminant or
computer virus into any computer, computer system or computer
network.
●● damages or causes to be damaged any computer, computer system or
computer network, data, computer data base or any other programs
residing in such computer, computer system or computer network.
●● disrupts or causes disruption of any computer, computer system or
computer network
●● denies or causes the denial of access to any person authorized to access
any computer, computer system or computer network by any means
●● provides any assistance to any person to facilitate access to a
computer, computer system or computer network in contravention of
the provisions of this Act, rules or regulations made there under
●● charges the services availed of by a person to the account of another
person by tampering with or manipulating any computer, computer
system, or computer network then the person shall be liable to pay
damages by way of compensation to the person so affected.
With the code of conduct as above, if a person accesses some data without
proper authorization then the person is held responsible and could be
punished. The information system and their impact must be audited and
users must be aware of the risks involved.
90
Privacy is an important social issue involved in information society. Privacy Information systems
deals with the collection and use or misuse of data. Today, there is not Economics and Security
even a single organization not using IT. Customer data is constantly being
collected and stored. This data is often distributed, sold or used without our
knowledge. The health sector and retail shops, for instance, have data on
its clients and customers. The fundamental question is “who owns this data
and information?” We know for sure that we would not like to share our
medical records with others, definitely not with insurance company or our
employers.
With Right to Information Act, which came up in 2005, the Government
of has empowered the citizens by giving right to be informed about the
activities of the Government as informed citizen is better equipped to keep
necessary vigil on governance. This Act, known as RTI Act, has further
amendments for better ease and control. This Act is very useful because of
digitization nationwide. Internet with the continuous developments in IT
and digitization has made information flow very high. Doing online business
using IT i.e. ecommerce generates lots of data. IT Act has made ecommerce
more adaptive and useful. Privacy of IT consumers and electronic documents
created require a comprehensive mechanism to check and control.

6.6 PROTECTING COMPUTER RESOURCES

AND DISASTER RECOVERY
Crimes involving illegal system access and use of computer services,
network, smart devices used over internet has increased. Hackers make use
of their knowledge to gain access to others systems. An intruder may alter
the data or destroy the data or may even have full control of the systems
making them unusable and useless just by writing a small program. To have
control over such intrusions and malpractices, organizations use various
methods. For personal identification use of biometrics like finger print, iris
and retina scan, face recognition are popular apart from the legacy system
of user-id and password. One Time Password (OTP) is also used, based on
the nature of user’s business. For example, a bank may use OTP for each
transaction by its customers. OTP is sent to the registered mobile of the
user. Unless both the transaction password and the OTP is correctly entered,
banking system will not allow to move further. Depending on the nature
of computer crime that an organization anticipates, it may adopt controls.
Proper access mechanism should be in place with good security devices
like firewall, intrusion detection and protection system etc. in terms of both
hardware and software security solutions. To summarize, suggestive control
guidelines are given below –
a) Install strong user authentication and encryption capabilities on your
firewall.
b) Upgrade your software with the help of patches, which are developed
by vendors whenever a security gap is found in the software.
c) Every employee in the organization should be given unique log-in
credentials i.e. user-id and password. All such credentials should be
changed regularly by the individual. System should prompt users to
change the password periodically ,say, after every 90 days.
91
Information Systems e) Separate zones should be created and maintained for different
category of users. For example, an academic institutions should have
separate access zones for its employees, students, and general public.
Dedicated servers for applications that communicate with outside
world may be deployed.
f) Audit trail must be used to track access log. A document once created
cannot be changed without leaving an audit trail. Integrated software
solutions like ERP packages, for instance, maintain audit trail. In case
of a crime, the audit trail is of immense help.
g) Install good antivirus software on all systems. Mobilize users to
periodically scan the systems they are using. Email attachments should
be scanned before opening and downloading files from suspicious
websites must be avoided.
Information system performs key functions for an organization. If for some
reason, the system becomes non-functional for some time, the consequences
may be unacceptable. Organizations usually have a set of emergency
procedures for critical functions. In best scenario, the end user will not be
able to discover the failure of regular system. Threats to the system could
be power failure, data corruption, storage failure, network failure, nature’s
threats in the form of a fire, flood or earthquake. In addition, labour unrest
or human errors may also render system unusable.
One of first stops of disaster planning is to identify threats. After identifying
the threats, appropriate disaster recovery plans for computer resources
should be implemented.
Hardware backup
In case of a natural disaster or due to technology failure, the hardware may
become unusable. There are companies and firms that provide disaster
recovery services. A company may provide a backup system that could be
used in case the primary system fails. Some companies also provide data
storage services. This could be used to keep a copy of data. With cloud
facility over internet backup system has become very easy to maintain.
Software Backup
Software programs are precious assets of an organization that must be
protected. A human error may delete a software package or a hardware
failure may make it inaccessible. A simple strategy is to make copies of
software and keep them safely. In addition, one may like to keep another
copy of-site in a safe environment.
Regular periodic backup should be adopted in practice. If the data is too
large, incremental backups can be taken or selected data may be backed up
at regular intervals.
The smart strategy is to be in pro-active mode rather than reactive mode. It
may be less expensive to plan ahead to avoid possible down time than suffer
losses.
Virus Protection
Computer viruses – sometimes known as malware – come in many different
forms. Till 2020, these were an incredible 350,000 new pieces of malware,
92
each one being a single piece of intrusive software. Viruses can find their way Information systems
onto just about any device – from computers, smart phones, to network of Economics and Security
an organization. A virus reproduces itself, usually without your permission
or knowledge. In general terms, they have an infection phase where they
reproduce widely and an attack phase where they do whatever damage they
are programmed to do (if any). Another way of looking at viruses is to
consider them to be programs written to create copies of them-selves. These
programs attach these copies onto host programs (infecting these programs).
When one of these hosts is executed, the virus code (which was attached
to the host) executes, and links copies of it-self to even more hosts. Many
viruses do unpleasant things such as deleting files or changing random data
on your disk, simulating typos or merely slowing your system down. Some
viruses infect other programs each time they are executed; other viruses
infect only upon a certain trigger. This trigger could be anything; a day or
time, an external event on your system etc. Viruses often delay revealing
their presence by launching their attack only after they have had ample
opportunity to spread. This means the attack could be delayed for days,
weeks, months, or even years after the initial infection. However, viruses
are only one way your data can be damaged. You must be prepared for all
threats; many of which are more likely to strike than viruses such as storage
failure due to hardware problem. All software and data reside in storage.
There are many other threats to your software and data that are much more
likely to harm you than viruses. There are a large number of virus types. The
most common computer viruses are categorized as below –
Macro Virus - This type of virus is normally found in Microsoft Word
and Excel files. This virus increases the size of files when it infects them
attaching its own generated codes. Once a macro virus infects a file, it can
easily spread to other computers when that file is shared, for example via
email or copied through other storage media.
Boot Sector Virus – This is the oldest virus affecting the startup or ‘boot’
process. Back in 90s, these viruses were spread through floppy disks.
Nowadays, they attach themselves to emails or USB sticks. If your computer
catches one of these, you’ll need to carry out a full system reformat.
Trojan Horses - Used by cyber-criminals, Trojan horses are disguised as
normal programs, tempting you to install them on your computer. Once
installed, the viruses gain access to your computer’s files and capture your
private data – think passwords and online banking information. This can
then be used by hackers to make online purchases with your bank account
or expose your private information.
Overwrite Virus - These viruses typically take over a file and wipe the
original code without you even knowing it. Once deleted, the original files
cannot be recovered and the data is lost. They often spread through emails
via attachments or through file downloads on the internet.
Browser Hijacker – This virus hijacks your internet searches and redirects
you to pages you didn’t even want to visit. While not as harmful as other
types of viruses – they trick you rather than steal from you – browser
hijackers are still an annoying problem since they significantly lower your
system when surfing the internet.
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Information Systems Web Scripting Virus -Web scripting viruses are very clever little bugs
that blend into the background of popular websites – usually social media
platforms. They disguise themselves as normal links, tempting you to click
on them. Once you click, they steal your information. They can send spam to
your system and damage your data, and can spread faster than most viruses.
Polymorphic Virus - A polymorphic virus modifies whenever it replicates.
This makes it hard for most anti-virus programs to keep up. Once it’s found
its way onto your computer – usually through an email attachment or a
download from a suspicious website – it has free reign to delete your files,
steal your data, and generally sabotage your system.
Resident Virus – This is the most common type of virus. It finds way into
your computer’s memory, completely uninvited, and resides there. Resident
viruses can come from email attachments, infected download or shared files.
Multipartite Virus - They usually spread through .exe files. – so programs
like Word and Excel. These viruses eat up your virtual memory. You start
getting messages like ‘your computer has low virtual memory’ resulting a
sudden slowing down of your computer.
Spacefiller Virus – This is also known as ‘‘cavity virus’. These viruses find
the empty spaces in a program code and add their own code. This way, they
don’t alter the size of files but corrupt the program itself. They are, however,
very rarely found.
Cyber Crime and Cyber Security
With internet overpowering the huge base of population globally, cyber
crime has emerged as a big threat to individual and organizations. Cyber
crime is a criminal activity that either targets or uses a computer, a computer
network or a networked device. Such activities are carried out by individuals
or organizations. Types of cyber crime may involve fraud with individual’s
emails, phishing and sending spam mails, personal or corporate data stealing
and using, cyber-extortion and ransom-ware attacks, cyber-spying to access
government or company data etc. Cybercriminals use viruses and malware
to commit such crimes including the Denial-of-Service (DoS) attack. If
such a situation prevails then total business comes to halt as credentials are
lost and the system goes in control of the cybercriminals.
Cyber security is the application of technologies, processes and controls to
protect systems, networks, programs, devices and data from cyber attacks.
It is to be noted that information security deals with protecting the integrity
and privacy of data, both in storage and in transit, cyber security is required
as a secret weapon against cyber criminals with the aim to reduce the
risk of cyber attacks and protect against the unauthorized exploitation of
systems, networks and other such resources. Since it is applicable to all,
working online through internet, Governments have made it mandatory for
the organizations in their countries to have sufficient control mechanisms
deployed. In India, Companies Rules 2014 framed under the Companies
Act 2013 requires companies to ensure that electronic records and security
systems are secure from unauthorized access and tampering. Similarly
Reserve Bank of India (RBI) provides guidelines for banks to secure banking
businesses. All the banks are supposed to mandatorily follow the ISO/IEC
94
27001 and ISO/IEC 27002 standards for ensuring adequate protection of Information systems
critical functions and processes. Similarly, SEBI requires stock exchanges, Economics and Security
depositories and clearing corporations to follow standards, such as ISO/IEC
27001, ISO/IEC 27002 and COBIT 5. Cybercrime Cells are also available
for individuals and organizations to lodge complaints at governmental level.
There are many organizations which provide cyber security as a service.
They provide complete solutions to mitigate and resolve issues related to
cybercrimes.
CERT –In
In accordance with the IT Rules, the Computer Emergency Response Team
of India (CERT-In) came into existence in 2004 in the Ministry of Electronics
and Information Technology (MEIT), Government of India. It is operational
since January 2004. Cert-In is the nodal agency responsible for collection,
analysis, and dissemination of information on cyber incidents and taking
emergency measures to contain such incidents. It responds to computer
security incidents as and when they occur. CERT-In has been designated to
serve as the national agency to perform the following functions in the area
of cyber security:
●● Collection, analysis and dissemination of information on cyber
incidents,
●● Forecast and alerts of cyber security incidents,
●● Emergency measures for handling cyber security incidents,
●● Coordination of cyber incident response activities,
●● Issue guidelines, advisories, vulnerability notes and whitepapers
relating to information security practices, procedures, prevention,
response and reporting of cyber incidents,
●● Such other functions relating to cyber security as may be prescribed.
(Source https://www.cert-in.org.in, https://www.lexology.com)

6.7 INFORMATION SYSTEM: SUCCESS AND

FAILURE
An Information System is developed to assist management in problem
specific decision-making. IS development and deployment project may
succeed or it may fail. A project is a success if it is completed within time
and budget and delivers all as decided in beginning. It must meet needs of
its users and organization. Over a period of time, the following main success
and failure factors have been identified. These days integrated software
modules are available which are required to be customized to have the
software in place. The software, so customized, may be either installed in in-
house serves or on cloud servers. In cloud servers and storage, organization
does not need to have servers and storage in its premises. Access to the IS is
through internet hence only computer/laptop/smart devices are required to
use the IS. There are many factors that contribute to the success of a project.
They are detailed below.

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Information Systems 1. The project scope should be stable and well understood. If the scope
of the project changes during the development or customization of the
software, the project is likely to suffer in terms of quality, schedule
and budget overrun.
2. An MIS project that aims at re-engineering the business processes of
an organization faces major challenge. Such projects are high-risk but
at the same time have high potential for major benefits.
3. The technology development platform and development language
exposure are other critical factors. Sometimes, the technology may
be new and the team may have difficulty using the technology. The
platform and language newness may also create trouble for the team.
4. Support from the management is vital for the success of the project.
If management looses interest in the project, budget may be cut, key
people may be moved to another project or the moral support required
by the team may become non-existent.
5. The objective of MIS must be in tune with the objective of the
organization. For instance, objective of an organization is to cut cost.
An MIS that aims to handle financial transactions of the company is
not in tune with the company’s objective.
6. The system should be user friendly and the response time should be
reasonable so that the user feels good to work on the system. User
should never be over-powered by the system.
7. MIS should be developed with a clear objective that must be
documented before the development commences. The objective must
be identified with the help of all stakeholders. The system analyst must
interview concerned people to establish their needs. Inputs should be
consolidated and presentation should be made in front of stakeholders
and the development team. This should go till the user requirements
are fully covered and understood i.e. till the objective becomes clear.
8. An important aspect of an MIS is data. Data policy such as what data
will be included, who will provide the data, who will validate the
data, who will integrate the data and how will the data retire should be
clearly stated. These seemingly trivial issues can turn a success into a
failure.
9. A quality control plan must be in place to ensure quality of specification
and quality of conformance. If required, a third party may be engaged
for this purpose.
10. The concerned people should be adequately trained on the new
system. This skill development process should go on periodically
to overcome gaps due to shifting of human resources or because of
changes made in IS.
11. The system should be properly and explicitly documented so that
attrition does not affect the project or MIS adversely.

6.8 SUMMARY
In this unit, you have been introduced to basic concept of data, information,
and knowledge. You have also learnt the growing need for information in
96
the society, ethical issues and right to information. The life cycle of data was Information systems
introduced. The information has a cost and value associated with it which Economics and Security
was discussed in some detail. Information System should be protected
and secured hence concepts of unauthorized access, cybercrime and cyber
security was discussed. Steps for disaster recovery and threats of virus to
mitigate and resolve security issues were discussed. An information system
depends on many factors for its success. We also discussed the main reasons
for success and failure of an MIS.

6.9 UNIT END EXERCISES

1. Define data and information. What is the difference between the two?
2. What are the main characteristics of information? Why do we require
in organizations?
4. What are various ways of assessing the value of information? Explain
each method briefly?
5. Write a detailed note on data life cycle.
6. What are the main reasons for success and failure of an information
system?
7. Does an organization have a right to collect and share information
without the permission of person concerned? What are the ethical
issues involved in information society.
8. Why should every organization have a disaster recovery plan to
protect itself?
9. Write a brief note on virus threat and a protection strategy.
10. Write a brief note of cyber security and cyber crimes.

6.10 REFERENCES AND SUGGESTED FURTHER

READINGS
Bishop Matt(2002), Computer Security: Art and Science, Addison-Wesley
Pub Co; 1st edition.
Davis, G.B., 2000, MIS Conceptual Foundations, Structure and
Development, McGraw Hill: New York.
Jawadekar, W.S., 5th Edition, Management Information System, Tata
McGraw Hill Education – Europe
Kanter, J., Management Oriented MIS, Prentice Hall Inc: Englewood-Cliffs.
Pfleeger Charles P & Pfleeger Shari L., (2002), Security in Computing, third
edition, Prentice Hall PTR.
Zani, W.S., “A Blue Print for MIS”, Harvard Business Review.
https://www.kaspersky.co.in site accessed on June 9, 2021
https://www.cert-in.org.in site accessed on June 9, 2021
https://www.meity.gov.in/content/icert site accessed on June 10, 2021
https://www.lexology.com site accessed on June 10, 2021
http://www.cknow.com/vtutor/vtintro.htm site accessed on June 10, 2021
97
 UNIT 7: TRANSACTION PROCESSING
SYSTEMS, DSS, AND EIS
Structure
1.1 Introduction
1.2 Objectives
1.3 Information from Data
1.4 Information in Managerial Functions
1.5 Information Systems in Management
1.6 Programmed and Non-Programmed Decisions
7.7 Environmental and Competitive Information System
7.8 Information Systems in Functional Areas
7.8.1 Marketing
7.8.2 Finance
7.8.3 Human Resource Management
7.9 Transaction Processing System
7.9.1 Human Resource Management Sub-System
7.9.2 Marketing Management Sub-System
7.10 DSS, and EIS
7.10.1 Decision Making Process
7.10.2 Decision Support System
7.10.3 Executive Information System
7.10.4 Difference between MIS, DSS and EIS
7.11 Summary
7.12 Unit End Exercises
7.13 References and Suggested Further Reading

7.1 INTRODUCTION
We know the importance of knowledge. It is considered to be a supreme
source for all activities. Well-appreciated strategic decisions are the
outcome of good knowledge. Acquirement of knowledge at one point of
time and continuous updating keeps a person fit for business survival in the
competitive environment. Learning from personal experience is one way
of gaining knowledge. Knowledge gained through sources like education,
interaction with others and other means is comparatively faster. Information
enriches the knowledge. Role of information and knowledge in managerial
decision-making is inevitable in nature. In managerial functions, knowledge
integrates the activities of different departments and enables the decision
maker to take right decisions. Further information enriches the managers
about the latest scenario on the vital areas of functional management like
Finance, Marketing, Human Resource and Operations. Information is
not only the foundation for any business; it also plays the role of bricks
98
in building up the business decisions. The generation and dissimilation of Transaction Processing
information should be a continuous process in the organization. Systems, DSS, and EIS

In this unit you will get an overview of basic information systems with focus
on functional areas. The coming two units will deal with HR & Marketing
Management and Operations & Financial Management respectively.

7.2 OBJECTIVES
After reading this unit, you should be able to
●● Describe the importance of information in managerial functions;
●● Identify the role of information;
●● Identify and appreciate the basic information systems;
●● Diagnose the situation for development of information system; and
●● Attribute the role of information systems in functional areas of
management.

7.3 INFORMATION FROM DATA

In simple terms, information is defined as the processed form of statistical
data. It is important to note that information and data are different to connote.
But they are interrelated. The raw data collected about any phenomenon
may be used to generate the required information.
While processing the data for the information, one needs to keep the
following in mind-
● Data should be accurate ●   Data should be relevant
● Data should be complete ●   Data should be time sensitive.
Information processing from the raw data can be represented as information
funnel. Procurement of correct information in right time is one of the
important aspects for business decisions. Having the right information in
hand, business organization can be proactive in its activities to maximize
the business profits. The following schematic chart indicates the position of
the information among other relevant characteristics like data, knowledge,
and wisdom.
Wisdom
Top Level
Knowledge
Top Level
Data Information
Middle Level
Information
Data
Knowledge Bottom level

Wisdom

Figure 7.1: Position of the Information

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Information Systems Information from data is generated by going in to different stages in the
process. They could be stated as:
●● Summarizing
●● Data trimming /mining
●● Presentation and
●● Indexing
Data collected for want of information are usually available in the form of
questionnaire, schedules, note, or the official unclassified formats. There
could be secondary data as well from the web. The first step towards the
analysis is summarizing i.e. bringing the data into the required form of
tables or arrays so that further treatment of data is possible. Grouping of the
data under different category will enable the analyst to identify a specific
tool for analysis. The computerized data processing for summarizing the
data through selected software expedites the process.
Data trimming is the condensation or consolidation of statistical data for
retrieving information. There are specific statistical data reduction tools for
trimming the data. Depending upon the nature of the data and the objectives
of the study, the tools are decided. For example, with the application of
statistical packages related to the inventory problems, it is possible to derive
information, say, for re-ordering of items with sufficient lead time so that
production does not get stopped because un-availability of an items.
The results obtained after data trimming need to be related to the objectives
for the meaningful representation. The process of depicting the statistical
results in the desired form (charts, diagrams, schematic representation etc.,)
is called presentation. The presented results will reveal the information in
a better way. Information, as an object could be derived from the presented
results.
Indexing or codification of the results is required for further processing
of information like storage and retrieval, modification, converting into
electronic mode for communication etc., The codification is the base for
presenting the information on web pages. In the Internet search the codes
are recognized by the computer at a greater speed to retrieve them from the
data dictionary or catalog. The big computer databases are designed and
used for data retrieval through proper indexing of the data. Thus raw data
collected from the field becomes information in the final form.
Types of Information
Information retrieved from raw data could be classified in different
categories as:
1. Facts
2. Assumptions
3. Collateral information
4. Fragmentary information
5. Irrelevant information
Facts are the accurate information. The information generated with the
assumption of mathematical models is called reliable information without
100
any uncertainty. In some statistical analysis certain amount of probability is Transaction Processing
used to predict the required results. Such information may not be 100% true. Systems, DSS, and EIS
This type of information is called information based on assumptions. The
other type of information is called collateral and fragmentary information.
This type of information cannot be directly retrieved but is a parallel source
of information. It is not considered to be reliable. Such sources need to be
investigated for acceptance.
The manager responsible for taking decisions requires sufficient information
from the relevant records available with the organization and if need
be from web also. The term information means collection of facts from
which business decisions can be drawn. Facts and figures collected in this
connection will enable the company to go for a valid decision.

7.4 INFORMATION IN MANAGERIAL

FUNCTIONS
With the representation of Antony’s structure, the data available at different
functional areas of management could be presented as follows:

Tactical Top Tactical

decisions Data

Strategic Strategic
decisions Middle Data

Operational Operational Operational

decisions Data

Figure 7.2: Data Available at Different Functional Areas

At operational level, organization gets in contact with public for information

procurement and dissemination. All types of inputs available from various
sources are gathered at this level. The routine office work like maintaining
inward register, maintaining of public relations, understanding the external
requirement etc are mostly done at this level. Though no decision making
process is carried out, proper accumulation of data has to be done at this level
for further processing. Hence it is sufficient to have a trained manpower
that can act as per the computer-assisted instructions. At middle level of
management, the input obtained from internal and external sources of
information will be processed for strategic decisions. This level consists of
middle level managers who can contribute significantly for the development
of organization. Different options available for each of the objectives are
evaluated carefully using the scientific tools of analysis and outcomes are
reported. The role of middle level decision process is considered to be very
crucial because the output received from this level is taken as input for
tactical decision-making. The highest level in this hierarchy is the tactical
decisions. This is the decision making group which should ultimately be
supported by the online information. To highlight the information needs
of the organization; the sources are classified as internal and external. In
general, the internal data sources for any organization, irrespective of its
nature, are Accounting control, Plans and budgets, Payroll, HR, Inventory,
Sales forecasting, Purchase, Transportation and distribution, Queuing,
101
Information Systems Operations, R & D etc. Similarly the external sources could be Economic
factors, Environmental factors, Market trend/constrains, Labor oriented
problems etc.
Educating the managers of the companies to understand the information
generation, treatment of information and applications in real decision-
making is very essential. The task of information generation, process of
information, management of information and timely communication or
dissimilation is interrelated and hence a systematic approach is required. As
the business decisions are based on the available information, adequate care
should be taken to have the right information.
The information perspective in an organization is viewed categorically for
managers as well as for the organization. The managers use the information
as an object for managerial decisions, as a construct to build up the
organization and tools to gain explicit and tacit knowledge. But for the point
of view of the management, information should be treated as a resource, as
perception pattern for the development, as a commodity to be appreciated
and as constituent force to meet the internal and external changes. Figure 9.3
shows the links among the perspectives on information in an organization
and as a manager.

Organizations
using

Information information
as resource Managers as perception
using of pattern
Information Information
as object as construct
explicit tacit
knowledge knowledge information
information as
as Information constitutive
commodity processes force

Information
management

Figure 7.3: The information environment in organizations

7.5 INFORMATION SYSTEMS IN MANAGEMENT

Information handling in an organization should be a systematic process.
Generally systems are created to solve problems. One can think of the systems
approach as an organized way of dealing with a problem. A collection of
components that work together to realize some objective forms a system.
Basically there are three major components in every system, namely input,
processing, and output.
Input Output
Processing
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In a system the different components are connected with each other and Transaction Processing
they are interdependent. For example, Human body represents a complete Systems, DSS, and EIS
natural system. We all are bound by many national systems such as political
system, economic system, educational system, health and hospital system
and so forth. The objectives of the system demand that some output is
produced as a result of processing the suitable inputs.
In business information processing system, input is received as data and
instructions, processing is done under the defined instructions and then
output is generated. The inputs to the system may be from a data file,
Internet source, or manual feed. Further the system interacts with human or
computers to support the operational and managerial decision making of an
organization. The managers should be well aware of information systems
because:
●● The amount to be spent on the information system should have
positive effect on profit making,
●● It increases business awareness, promotes business re-engineering
and enables total quality management to the managers,
●● If the managers are not acquainted with the information systems,
significant amount will be wasted on automating ineffective process
or at the extreme, companies can fail as a result of poor management.
The organization expands in the direction of information expansion.
Flexibilities in information handling help the managers to take advantage
of all business opportunities irrespective of small or large-scale enterprises.
Some of the important implications about the IS deployment and management
on information are as follows:
1) Information system will contribute substantially to the managers
in their effective decision making to achieve the organizational
objectives,
2) Information system will enrich the organization to meet the competitive
challenges,
3) Adequate knowledge from the past experience will help the Managers
to integrate the business strategy,
4) Information system will provide sufficient awareness about the
external components to react accordingly,
5) Information system is required to take right decisions in right time.
The effectiveness of information management can be measured by the extent
of knowledge creation or innovation in organizations. The process approach
to information management supports the integration of business strategy
and information. Some of the important implications about information
management are as follows:
1) If information is conceptualized as a process it can be integrated into
strategy formation
2) Information management should account the information as an object
and as a construct
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Information Systems 3) It has a role in enhancing the information capabilities of individuals in
organizations
4) Almost all managerial activities have an information component. So
information management practice should be responsive to the needs
of managers as information users and as information producers or
knowledge creators
The importance of information in management is further emphasized by
the fact that much of management is primarily decision making. While
there are several views of what constitute management, the generally
accepted planning, organizing, coordinating, directing, and control
are all concerned with decision-making. Several functional areas of
management viz. Personnel, Marketing, Production, Finance and Services
will be significantly influenced by the information systems that are to be
implemented in an organization. Information once acquired need to be
communicated promptly to various departments as per their requirement.
The free exchange of information in an organization is called information
flow. Information flow integrates various levels of management discussed
earlier. Operational decisions deals with a large volume of internal data. The
middle management is concerned with medium range or tactical decisions
required for much less information. The top management being concerned
with long term or strategic decisions requires for just a few vital internal
information but a lot of external information. The successful information
system should take into account such a pattern of information needs by
the management. Typical example of the three levels of information among
the functional areas of management can be represented with the help of a
pyramid structure as given in Figure 7.4.

Decision support
system

Top level
(Strategical)

Transaction
processing system
Middle level
(Tactical)

Office
automation
system
Bottom level
(Operational)

Figure 7.4: The information systems and Management levels

All the four major areas of management are inter-related. Creating a master
database comprising of the activities of the organization irrespective of the
specific area is a must. It should be possible to retrieve the data for any
further information. This kind of approach is called integrated approach. The
master database created should be flexible to have the following features:
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1) Distribute and share the data on network Transaction Processing
Systems, DSS, and EIS
2) Normalized to accept the unique characteristics,
3) Capable of automatic updating
4) Quick query
The following diagram depicts the creation of centralized database for
application to various functional areas of management.

Marketing
Order entry
Billing
Sales analysis
Forecasting
Distribution statistics

HRM Finance
Recruiting Financial plan
Placement Managerial Cost & asset accounting
Training functions Budgets
Compensation Accounts received
Maintenance Payroll

Operations
Inventory costing
Capacity planning
Job-performance
Requirement plan
Purchase commitments

Figure 7.5: Creation of Centralized Database for Various Functional Areas Application

A typical example of role of information systems for the important areas

of functional management at different level of decision-making is shown
below:
Table 7.1: A typical example of role of information systems
Production Finance Personnel Marketing
Strategic New plant Alternative Welfare Competitor
Location Financing Policy Survey
Tactical Production Variance Performance Advertising
Bottleneck Analysis Appraisal
Operational Daily Scheduling Payroll Leave Sales
Records Analysis

7.6 PROGRAMMED AND NON-PROGRAMMED

DECISIONS
Managerial decisions are classified into programmed and non-programmed
categories. There are some situations in which the analytical methods of
105
Information Systems decision-making are possible and in some other situations one need to apply
the intuitive methods of decision making. Programmed decisions are those
that can easily be automated, like the determination of optimal product
mix, minimum cost production schedule, optimal sequencing of machines
to minimize mean flow time etc. Generally large data and a few decision
rules or algorithms that use the data in an automated fashion to arrive at
an optimal plan characterize such decisions. Techniques of Operations
Research like Linear Programming represent a typical example of this
category of decisions that use formal data and algorithms. Naturally such
decisions are easily programmed. In other words they can be represented
as an algorithmic procedure into unambiguous instructions whose step-
by-step execution will lead the optimal result. Since these algorithms are
likely to be codified in the form of a computer program and run on a digital
computer, they are programmable or programmed decisions. The key to such
programmability is the underlying structure of these decision situations that
permit an algorithmic translation. Many of the programmed decisions may
need the most challenging algorithms involving the best brains available
at that moment for their solution. Nevertheless they are translatable into
algorithmic procedures. Simon’s predictions of the fifties have practically
come true in the nineties. This is borne out by the large number of decision
support systems that use data and models to automate such decisions like
reorder levels in materials and production control, control limits for process
re-setting etc. Information support for such programmed decisions can be
designed rather easily.
Non-programmed decisions on the other hand do not lend themselves to easy
automation. The model support for such programmed decisions would need
more of heuristics rather than optimal algorithms. Optimization Algorithms
as mentioned earlier, are formalized procedures readily implemented as a
finitely terminating, computer programs with guaranteed outcome of optimal
solutions, whenever they exist. Heuristics, on the contrary, generally yield
near optimal if not the optimal solution but cannot guarantee optimality. The
heuristics themselves may be implemented in the form of an algorithmic
procedure and solved on a computer; however the decision situation may
not have admitted any optimal algorithm. The interesting developments
in complexity theory of the theoretical computer science also led to an
interesting observation that for many interesting optimization problems,
heuristics are necessary as no optimizations algorithms with reasonable
estimates of computational performance are known to exist. This idea led
to the heuristic problem solving approach where one gets good solutions
and even optimal solutions but optimality cannot be guaranteed. Such
heuristic procedures for the solution of many real-world problems in the
area of scheduling and resource allocation have been found to be extremely
successful.
Over the years the programmed and non-programmed decisions have also
been known as structured and unstructured decisions. While designing,
information systems one should keep this vital difference between the two
types of decisions in mind. Flexible access to data, user friendliness, graphical
user interfaces, natural language support, what-if analysis, capability, etc.
characterize information support for non- programmed decisions.
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Example for programmed decisions: Consider the problem faced frequently Transaction Processing
by a Small and Medium sized Enterprises (SMEs) in deciding about the size Systems, DSS, and EIS
to be ordered to maximize the profit on consumable items, say, number of
units of food packets. The small-scale enterprise is doing the business of
trading between the wholesaler and retailer. The purchase price per unit is p1
and the selling price is p2 where p1< p2. The unsold item for the season/for the
day will make a loss to the dealer and hence the dealer will be able to return
it at the lower price p3(p1>p3). The objective is to decide about the number
of units to be ordered to maximize the profit. The intuitive approach to this
problem will lead to problem specific and cannot be conceptualized. It is
better to think of using structured analysis or analytical approach. Assume
that the number of units demanded is D and the quantity ordered is Q. The
logical flow of this approach is

Get D and Q

Yes No
D<Q

(p2-p1)D – (p1-p3) (Q-D) (p2-p1) Q

This is called conceptualization of the problem. Once the problem is

conceptualized, we can give the mathematical function to the problem.
The mathematical formulation to find the profit to this problem with the
above notations is:

 (p2-p1) Q    if D ≥ Q
Profit 
 (p2-p1)D – (p1-p3) (Q-D)    if D < Q
The model defined above could be used for any available quantities of D
and Q. The advantages of this model are:
1. The system is open to anyone in the organization for application
2. Instantaneous and accurate calculation is possible
3. Enables computerization of the system
4. Flexible for review/modification.
This kind of approach is called systematic approach or programmable
decisions, which is the base for the system development for retrieval of
information.
Example for non-programmed decisions:
Managers are quite efficient to make better decisions as they have got
a great deal of experience. Sometimes decisions need to be taken in the
light of the situations and not in general. The persons who are in the field
for quite some time will understand easily and the decision can be taken
accordingly. For example, to commission a power plant, conducting an in
house survey about the past performance of the plant is sufficient to gain
adequate information instead of going for a generalized study.
In non-programmed decisions, the conclusions could be arrived through the
following simple steps (Dewey):

107
Information Systems 1) Identify the problem
2) Identify the alternatives
3) Select the best alternative.
Though the programmed decisions are considered to be more accurate,
there are some situations in which the assumptions made under this category
cannot be fully practical and hence the approach of non-programmed
decisions are used. If the decision maker is well experienced, no doubt the
accuracy could be maintained and admit that the experience improves the
problem solving.

7.7 ENVIRONMENTAL AND COMPETITIVE

INFORMATION SYSTEM
The information system developed for business purposes should take
into account all the conditions, which affect the business transactions.
Usually the two major factors responsible for the business changes are the
environmental conditions (local and global) and the comparative factors.
Successful development of information systems should have been based
on the deep understanding of the organizational structure and dynamics
of the enterprise also. For production department the assignment of jobs
to machines or machines to operators in a production environment is
very important. For a service organization like hospital it may be a duty
roster for nurses, doctors or other paramedical staff. Such schedules must
be detailed and unambiguous reports could be produced in large number
at relatively low cost. Most of the information contained in such reports
is internal - to the special shop or hospital. Some organization are goal
oriented, the analyst must be clear as to what information exactly need to
be collected, stored and analyzed. Since every information must have a
context, only operational information that ultimately has some decision-
making contribution must be collected. Secondly, the information collected
and processed must be consistent with the level of the organization to which
it is to be presented. Organizations have not only found out the immense
utility of information systems to better manage their organizations but
are also feeling the potential of the competitive advantage provided by,
information as a resource. The classic example of the use of information
for competitive advantage is Airline Reservation System and the Frequent
Flier Option introduced by Airlines the world over. These are examples that
illustrate the use of information not just to run business effectively but also
to open up new business vistas. Similarly festive seasons offer by Retailers
and credits given to customers by them beyond certain limit of purchases
could be another example.
The payroll represents a typical operational system for the financial
management. Since such systems must execute accurately data pertaining
to a large number of staff in a timely manner, month after month, cost based
efficiency and speed would be a major consideration in the design of such
a system.
Detailed Sales Analysis is a must for any sales and marketing function. This
might involve a very detailed data collection and processing pertaining to
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every salesman, every product over a long time span of an entire year or a Transaction Processing
quarter with even details of the region, market segment etc. Accuracy and Systems, DSS, and EIS
timeliness of this effort would decide the quality of tactical and strategic
decisions that may be based on summary information generated out of this
data. Accuracy and desegregation would be the watchword for such detailed
data collection effort.
Naturally information systems must have summary information, with
provision for detailed information to provide such information. Comparative
analysis shift wise, plant-wise, machine-wise, operator-wise etc. may be
necessary. The watch word would be insight & analysis and not mere
reporting of data Variance Analysis for the finance function would call
for systems that point out deficiencies, cost over runs, budget excess by
carefully matching goal or target information with summary information
generated by operational data. Once again the accuracy is important; but
what is more important is the clear recognition and highlighting of patterns
that can help the decision maker to initiate action and bring systems under
control. Timeliness is a must, as the systems must be reset before it is too
late.
A tactical system under personnel function is the Performance Appraisal,
which would take into account among several other things, the individual
employee leave records. The details may not be that important but patterns
are. Whenever they are clearly visible. Certain policy conformance may
also be checked through such analysis. Since decisions based on such
systems are likely to have medium to long-term impact, accuracy should
not be underestimated, while keeping the priority of analysis.
Advertising Information System is another examples of tactical information
system for the marketing function of management. Needless to say planning
for advertisement would use much of the information generated by detailed
sales analysis (an operational MIS system). But to be able to decide on
the levels of advertisement, mix of advertisement, budget for advertisement
etc., calls for certain policy parameters as well as environmental (outside
organization) information. This point must be clearly borne in mind in
designing MIS for tactical decision situations.
A strategic decision by the production function of the management is
a New Plant Location. This would use much of the internal information
generated by the tactical system designed to analyze the production
bottleneck that is internal to the organization. But a long term decision like
location of a new plant is likely to be influenced far more by environmental
information like changing market, changing technology, changing fiscal
and governmental policy like deregulation, tax incentive for backward area
etc. Obviously strategic information systems should have a mechanism
of scanning and assimilating environmental information that are likely to
influence strategic decisions in a systematic way. For the finance discipline,
alternative financing is a strategic decision. It will use a summary status
information about the internal finances of the company including payroll,
budget, overruns, variance analysis etc. but will be primarily governed by
long term policy, business environment etc. that are strategically important
to the survival and growth of the organization. Information support for
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Information Systems such strategic decision would call for substantial external information
supplemented with internal financial health indicators. Decision concerning
welfare policy of an organization is a strategic decision that must be faced
by personnel (also known as human resource development) management. It
will be tempered by internal information about staff size, their quality, and
the compensation package etc. but the strategic decision will be governed
by the future vision for the organization as seen by the top management
as well as the labor market conditions of the environment. Being a long-
term decision with major impact on the corporate health of the organization
this strategic decision need to be supported by a balance blend of external
and internal information. While we take primarily the decision-making role
of the management in the design of the information systems, care must
be taken to take into account the stark realities of managerial work-style.
The diversity of managerial work, the interpersonal dynamics; politics of
people, resistance to change, etc. must also be taken into account. These are
issues beyond the scope of this text but must be taken into account in the
actual implementation. A strategic decision for the marketing function is a
survey of competition and the resulting strategy of gaining market share.
While a detailed analysis of in-company sales and advertising is a necessary
prerequisite, much will depend on the present and future strategies of the
competitors who are external to the environment. Once again this brings to
the focus the importance of external factors for strategic decision, policy
likes deregulation, tax incentive for backward area etc. Obviously strategic
information systems should have a mechanism of scanning and assimilating
environmental information that are likely to influence strategic decisions in
a systematic way.

7.8 INFORMATION SYSTEMS IN FUNCTIONAL

AREAS AND DECISION-MAKING
Let us discuss some of the information systems in functional areas and their
contribution to decision making.
7.8.1 Marketing Management System
The term marketing as per the American Marketing Association (AMA) is
defined as the process of
●● Planning and executing the conception,
●● Pricing,
●● Promotion and
●● Distribution of ideas, goods, and services to create exchanges that
satisfy individual and organizational objectives.
Marketing function facilitates the activities mostly related to -
●● Forecasting and sales planning
●● Market research
●● Advertising
●● Operation and control of information required for market.
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The management of information, which provides output to the above- Transaction Processing
specified activities, is one of the important aspects in the business. To fulfill Systems, DSS, and EIS
the objectives of the marketing, periodic tasks pertaining to collection of
data, analysis and presentation in the form of required reports need to be
performed. The integrated approach comprising the data input, generation
of marketing information and supply of output in the required format is
called marketing information system. It consists of people, equipment,
and procedure to gather, sort, analyze, evaluate, and distribute timely, and
accurate information to decision making. Marketing information system
are expected to help the management in decision processing for pricing
the product, packaging, new product development, product mix analysis,
advertising, product promotion policy, sales strategy, inventory control and
production schedule. The data available at one place could be used centrally
for the retrieval of required information and information generated by one
department could be shared for others to prepare the reports.
The following table depicts the data availability, tools employed and output
expected in marketing area.
Table 7.2: Data Availability, Tools Employed, and Output Expected in
Marketing Area
Data available Tools employed Output
Sales Forecasting Methods Expected Production
Advertisement Optimization Models Profit Maximization
Expenditure
Territorial Data Methods of Market Penetration Market Expansion
Consumer Brand Switching Tools Market Segment
Preference
Price Comparative Analysis Pricing Strategy
Movement of Inventory Tools Minimizing the
Goods Storage Cost
The development of marketing information system should consist of various
sub-systems on marketing research, marketing planning, sales analysis and
market control. The inputs, processing, and outputs for these sub-systems
are as follows:
Marketing Research
Inputs
●● Based on external data collated from the industry primarily constituting
sales performance analysis of a variety of brands in various market
segments of various companies
●● Industrial infrastructure, marketing, production strength and weakness
●● Industrial advertising drive and impact
●● Industrial pricing policy and consequences
●● Internal data compiled in the company constituting sales performance
analysis of various brands of the company in various market segments;
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Information Systems ●● Strategic marketing attribute and forecast data versus actual sales
performance data
●● Advertising budget and actual spending
●● Infrastructure budgets
●● Prices of products and sales figures
Outputs
●● Intensive reports on industry wide sales performances
●● Inferences of results compared to forecasts with respect to past
marketing strategy, advertising and pricing policies
●● Review of marketing strategy, advertising and pricing policies
●● Market share of the company
Marketing Planning
Inputs
●● Summarized data from market research
Outputs
●● Review of sales forecasts
●● Product mix strategic reports
●● Market mix strategic reports
Sales analysis
Inputs
●● Sales data by region/product/personnel in terms of value and quantity
●● Projected sales data by region/product/personnel for comparison with
the actual sales
●● Sales data customer wise with the transaction data for invoicing
system
Outputs
●● Sales reports region/product/personnel in terms of value and quantity
●● Variance analysis on actual sales versus projected sales
Marketing Control
Inputs
●● Sales data of various products of a company
●● Marketing expense data
●● Summarized output sales analysis constituting sales performance data
personnel/region/product wise
●● Sales transaction data from invoicing and sales systems
Outputs
●● Variance analysis
●● Age analysis
●● Tactical reports on desirable and undesirable trends
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The typical transaction in the marketing sub-system is depicted through the Transaction Processing
Figure 7.6 : Systems, DSS, and EIS

Company
database Marketing Sub-System

Data ● Sales forecast ● Profit plan

pertaining to ● Media planning ● Bill of
sales plan, ● Brand switching materials
bills profit ● Sales
● Perceptional
plan etc.
analysis analysis

Figure 7.6: Typical Transaction in the Marketing Sub-System

To integrate the activities of marketing, sub-systems are broadly classified

on the following types.
1) Control systems
2) Planning systems
3) Market research systems
4) Sales systems
Activity A
Prepare a brief report on the market planning and sales analysis of a company
of your choice. What are the benefits derived out of computers and MIS.
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………
7.8.2 Financial Management System
Financial accounting deals with collection, recording, and evaluation of
financial data. Business enterprise requires systematic maintenance of their
records that help for preparing the financial statements like Profit & Loss
Accounts and Balance sheet. Accounting is considered as an information
system because it has inputs of financial data, processing by evaluation and
outputs through financial reports. The importance of financial information
system for the different users in the managerial area can be depicted as:
Nature of information Ultimate user
Cost planning and cost control of operations Management
Profitability of the firm
Strategic and tactical decisions
Profitability of the firm Shareholders & investors
Soundness of the invest
Growth prospects of the firm
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Information Systems
Liquidity of the firm Creditors
Profitability and financial soundness
Statement of salaries, wages and bonus Employees
Managing the industrial economy of the Government
Country, Collection of sales, excise and
Other taxes
Financial growth of the firm Consumers & public
Social role of the firm in different sectors
To fulfill the needs of financial information the information system used in
most of the comanies may be classified as under:
1) Financial accounting To provide information to Government,
systems - investors, and other parties in the form of
reports
2) Management To provide reports to mangers for strategic
accounting system - and tactic decisions
3) Cost accounting To provide information about cost planning
system – and control operations to the managers.

Financial information
Online query Various outputs
system

Financial accounting Management

Cost accounting system
system accounting system

Processing of
financial data Financial data
inputs

Figure 7.7: Financial Information system

The objectives of implementing computerized financial accounting system

include:
●● Maintaining account books
●● Preparation of general ledger
●● Generating accounts receivable and accounts payable statements
●● Generating profit & loss account and balance sheet
●● Generating updated financial data for other systems
Inputs to the system
The input data from the financial system are from
●● Cash vouchers
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●● Bank vouchers Transaction Processing
Systems, DSS, and EIS
●● Sale vouchers
●● Purchase vouchers
●● Journal vouchers
Outputs to the system
●● The outputs expected from the system are:
●● Account books like cash book, bank book sale book etc
●● Trial balance
●● Trading account
●● Profit & Loss account
●● Balance sheet
●● Accounts receivable statement
●● Account payable statement
The Financial management is the most important aspect in managerial
functions. Managers quite often require the financial position of the
organization for various reasons like planning, monitoring, performance
evaluation etc of the companies to decide about further action. In traditional
method of information retrieval different kinds of books, ledgers and
financial records have been kept to follow up the financial position and by
end of each month status used to be calculated. Computerization of financial
record not only simplifies the procedure but also is more accurate. With
computerization on-line information could be accessed. As most of the
companies have gone for the computerized data record, creating a database
with required entries will facilitate the storage o information and any kind
of manipulation based on the database. A few advanced applications in
financial transactions are e-commerce, e-business and on-line banking.
System development for financial management is not only to make the
computerized billing or providing the receipts for the transactions. The
system integrates number of financial transactions of the organization.
7.8.3 Human Resource Management
The manpower utilized in the organization is treated as a valued asset. The
management of this asset is just like management of any other source in
an organization. Organizational, effectiveness and efficiency, growth of
the business, sustainability for the competitiveness can be seen through
proper management of human resources. HRD management emphasizes
an optimum utilization of human resources by formulating consistent and
coherent policies aimed at promoting commitment to the organization. The
information system on HRD is restricted to personnel management systems
whose role is to assist in
●● Recruitment,
●● Placement,
●● Training and development,
●● Compensation and
●● Maintenance
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Information Systems The vital area covering the above activities is called Human Resource
Planning. HRD system binds functions of personnel management systems
with other functions of organization such as marketing, finance, production,
and inventory.

Human Resource
Input
Planning

Organizational
data
● HR budgeting
● Recruitment
Output
● Training
● Alternate sources Relevant
● Ratio trend ● Replacement formats for
analysis ● Motivation HR planning
● Work analysis ● Compensation
● Cost/benefit
analysis

Figure 7.8: HR Information system

7.9 TRANSACTION PROCESSING SYSTEM

Management information system, in general, consists of all business
transactions of the organization. Every information system has many
subsystems like transaction processing system, decision support system,
office automation system etc, to have a larger utility of database created for
business analysis. The decision makers do retrieval of information from the
master data through a set of well-defined tools. For example, to calculate
the net salary of an employee, we need to supply different inputs like basic
salary, number of days present, existing DA, and HRA levels. Accounts
department uses this information to calculate the final receivable salary
of an employee. This process is called transaction process of the data for
payroll calculation. As this is a part of the information system, it can be
called as a subsystem. Preparation of transaction documents such as pay
slips, invoices, and receipts is important and routine task performed in
managerial functions. The general view of transaction processing system is
shown in Figure 7.9:

Transaction
module-I
Central
General
Processing
database Transaction
module-II

Output
Formats

Figure 7.9: General view of Transaction Processing System

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Data manipulation to get the desired information through the specific Transaction Processing
tools of management is called transaction process. As applicable in other Systems, DSS, and EIS
cases, different areas of management like HRM, Finance, Operations, and
Marketing have various business transaction processing systems and hence
the sub systems to generate required output are needed. We will discuss
some examples of such sub systems for transaction processing.
7.9.1 Human Resource Management Sub-System
In Human Resource Management, the Personnel Manager has the
responsibility of executing multifarious activities pertaining to recruitment,
training of the employees, retirement benefits of the employees etc.
Planning, executing, and controlling of these activities about the existing
employees is carried out by the personnel manager through the information
system called personnel information system developed for this purpose.
The personnel information system deals with the flow of information about
people working in the organization as well as future personnel needs. In
most of the organizations, the system is concerned primarily with five basic
subsystems of the personnel function: recruitment, placement, training,
compensation, and maintenance.
Let us discuss three of these subsystems separately:
1. Recruitment
2. Retention/service conditions
3. Retirement

Human
Recruitment Resource Retention
Management

Output
of the
Retirement
formats/
results

Figure 7.10: Transaction Modules in Human Resource Management

Recruitment
Role of personnel department starts with recruitment of personnel. If
properly managed, the recruitment system forecasts personnel needs and
skills and recruits the personnel at the proper time to meet organizational
needs. Personnel department on the basis of retirements/resignations
either identifies requirements, or concerned department sends requirement
to personnel department. On the basis of the requirements, personnel
department initiates process of recruitment, which is divided into the
following steps:
●● Finalizing the requirement for various posts
●● Publicity as per requirement
●● Receipt of application forms from candidates

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Information Systems ●● Initial screening
●● Interviews
●● Final selection
●● Issuing appointment letters
Development of proper information system for generation of reports
pertaining to the above cases, by giving the necessary inputs, lead to a Sub-
System for this purpose.
Retention/Service conditions
This is an important aspect in the functioning of personnel department.
Personnel department maintains records of all the employees about the
nature of the job, department etc. The major activities undertaken and
related data requirements here are:
●● Training/Seminars/Refresher courses for employees
●● Job
●● Promotion
●● Increments
●● Leave accounting
●● Performance reports
●● Salary/compensation
●● Organizational structure
●● Job description
●● Liaison
Information on each of the areas is compiled from the master database
created and made available in the organization.
Retirement
Personnel department keeps track of retiring employees. It completes all the
formalities necessary and issues orders for providing retirement package
through account department. The calculation requires various inputs about
the employees from the personnel records.
There are other subsystems also like Compensation & Maintenance etc.
Another interesting subsystem could be Skills inventory program, which
identifies and locate the talent resources of the organization to maximize
their use. The concept of “Skill banks” or “manpower assessment program”
is applied. This could be one of the subsystems to develop and support the
main system.
7.9.2 Marketing Management Sub-System
As we have seen in the previous unit, the business function of marketing
deals with different activities like planning, promotion, and sale of existing
products and exploring the market trend for the existing and new products.
Information system specially designed taking into account all these factors
can only supply the required competitive information for the benefit of
customers and management.

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Different categorical decision systems like strategic, tactical and operational Transaction Processing
information help in the activities of the marketing managers in product Systems, DSS, and EIS
planning, pricing of the product, planning for advertising, sales promotion
& expenditure, forecasting market potential for new and existing product
and deciding about the distribution channel etc.
Control reporting systems support the efforts of marketing mangers to
control the efficiency and effectiveness of selling & distribution of products
and services. Analytical reports provide information on firm’s actual
performance versus planned marketing objectives.
The major marketing subsystems are:
●● Sales Management
●● Sales forecasting
●● Advertising and promotion
●● Marketing research

Sales Sales
management forecasting

Adv. Market
promotion research

Figure 7.11: Transaction modules in marketing area

Sales Management
Sales Management system provides information to help sales managers plan
and monitor the performance of the sales organization. In most firms, this
system produces sales analysis reports, which provide information analysis
of
a) Product sales trends
b) Product profitability on a product-by-product basis
c) The performance of each sales region and sales branch
d) Sales persons performance
To fully support the sales systems, invoices should contain information
about product type, product quantity, price discount terms, customer identity
& type, sales region and sales person.
The sales reports must contain information about the profitability of
products, product lines, sales territories, and individual salespersons.
Profitability reporting requires information about product administration
and selling costs.
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Information Systems The sales analysis system also provides information used to evaluate the
performance of sales personnel. By reclassifying sales by sales person rather
than by product or sales unit, it is easy for the sales supervisors to identify
whether each salesperson has met the assigned sales quota. If marginal costs
are also assigned by salesperson, each salesperson’s contribution margin
can be established as one criterion for performance evaluation.
The primary types of information as inputs used for the sales analysis
subsystem are:
i) Information about customer invoices and back orders that is provided
by the sales transaction processing systems
ii) Information derived from the oral and written reports of sales
personnel
iii) Product cost information obtained from the cost accounting
information systems
iv) Information about the sales transactions may be available from the
sales files or the customer files.
Sales Forecasting
Sales forecasting is important for planning sales and promotion strategies and
for post period evaluation of salesperson’s performance. Sales forecasts are
generally the first step in the profit planning cycle of the entire organization
e.g. they initiate the short-term financial and marketing planning cycles.
If forecasts for the period are seriously in error, the organizations entire
budgeting activity will be based upon the wrong level of activity.
The basic functions of sales forecasting can be grouped into the two
categories of short-range forecasting and long-range forecasting. Short-
range forecasting deals with forecasts of sales for periods up to one year,
whereas long-range forecasting is concerned with sales forecasts for a year
or more into the future. Forecasting requires the application of mathematical
and statistical methods, which consists of structured procedure. Methods like
time series analysis, regression models etc., are used for sales forecasting.
Production planning, work force planning, and production scheduling
are based on sales forecasting. Materials are ordered and personnel are
employed and reassigned according to the expected sales pattern for the
next period. If sales are overestimated either finished product inventory
levels or materials inventory will be excessive, or personnel will have to
be laid off. Conversely, if the sales forecast is too low, either sales would
be lost because of inventory shortages, or higher costs will be incurred as a
result of overtime and need to secure additional materials in a hurry.
The basic information needed for sales forecasting is as follows:
i) Past sales, provided by the sales analysis information system
ii) Market conditions, provided by the market information system
iii) Competitor’s activities provided by the competitor intelligence
information system
iv) Promotion and advertising plans, provided by the information system
for this function
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In similar way, sub-systems for other application systems like Finance Transaction Processing
Management, Production and Operations Management, Inventory Systems, DSS, and EIS
Management etc. exist for corresponding functionalities.
Activity B
Consider an organization dealing with on line sales by maintaining inventory
of items. There are suppliers who supplies items to the organization for
sales. Outline the various functional activities for the transactions involved.
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………

7.10 DSS AND EIS

DSS stands for Decision Support System. It is software which supports an
organization in taking decision. Executive Information System (EIS) is a
data driven DSS that is intended to provide business intelligence to middle
and senior level managers. In both the systems decision making process is
involved. Let us now understand the decision making process first of all.
7.10.1 Decision Making Process
A decision is basically a resource allocation process that is irreversible,
except that a fresh decision may reverse it or overrule the earlier one. The
decision maker, having authority over the resources being allocated, makes
a decision. He makes the decision in order to further some objective, which
is what he hopes to achieve by allocating the resources. The decision might
not succeed in achieving the objective. One might spend the funds and yet,
for any number of reasons, achieve no acceleration at all. For example: To
accelerate an R&D program is an objective, not a decision. To allocate the
funds in an effort to accelerate the program is a decision.
Simple decision is one in which there is only one decision to be made, even
having many alternatives.
A decision may be goal oriented for some degree of satisfaction for a given
objective. Objective may be driven by a decision but goal is always target/
result oriented. A decision may employ decision analysis; a structured
thought process to attain desired results. In doing this, we can distinguish
three features of the situation: alternatives, uncertainties and outcomes.
Decision analysis thus constructs models, logical or even mathematical,
representing the relationships within and between the features of situation.
The models then allow the decision maker to estimate the possible
implications of each course of action that he might take, so that he can
better understand the relationship between his actions and his objectives.
Someone who buys a lottery ticket and wins the lottery obtains a good
outcome. Yet, the decision to buy the lottery ticket may or may not have
been a good decision.
Decision maker may adopt strategy, which is a collection of actions. The
outcome of these actions may be uncertain, but the possible outcome is
attainment of that goal set by the decision maker. It is necessary to mention
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Information Systems about the risk at this juncture that a decision maker often thinks while
taking the decisions. Risk can be defined as the possibility of an undesirable
result. The risk is linked with monitory benefits or loss and thus, it can be
governed by risk tolerance, an individual’s attitude toward decision and
the risk involved.
With the above background, we can now distinguish between strategic and
tactical decisions. Strategic decision affects entire organization or major
part of it vis-à-vis organizational objectives and the policies. It has long
lasting effect on the organizational system and generally taken at the highest
management level. On the other hand, tactical decision or management
control decision affects a part of the organization for a restricted or short
time. The tactical decision takes place within the context of existing strategic
decisions. Thus, the contextual and effective management depends on good
and timely information. The decision making process may use various
techniques depending on the situation. We can define decision-making as an
activity of deciding appropriate action in particular situations. With relevant
and useful information the decision-making may reduce the uncertainty.
We have studied earlier that Simon provided a general model of any decision
making process. The Simon model describes the sequence of decision
making as: Intelligence, Design, Choice, and Implementation.
7.10.2 Decision Support System
With the understanding of decision making process DSS can be defined as
the system that supports the decision making. There are various definitions
of DSS that links to information retrieval with the help of computers, to
use of information, to support managers. Let us see that how some of these
definitions describe DSS:
Table 7.3: Various definitions of DSS
S.
Definition given by Definition
No.
Decision support implies the use of computers to a) assist
managers in their decision processes in semi-structured
G.W. Peter Keen and
1. tasks; b) support rather than replace, managerial judgment;
Michael S. Morton
c) improve the effectiveness of decision making rather than
its efficiency.
Information system featuring an integrated system
2. Ralph H. Sprague composed of decision models, database and decision maker
to support decision-making.
An integrated set of computer tools that allow a decision
maker to interact directly with computers to create
3. James Hick
information useful in making unanticipated semi-structured
and unstructured decisions.
Decision Support System are analytical models used to
4. Carroll W. Frenzel increase managerial or professional decision making by
bringing important data to view.
William E. Leigh A set of computer based tools used by managers in
5. and Michael E. connection with his or her problem solving and decision
Doherty making duties.
These definitions points that :
1) decision support systems are information systems;
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2) decision support systems are used by managers; Transaction Processing
Systems, DSS, and EIS
3) decision support systems are used in making decisions;
4) decision support systems are used to support, not to replace, people;
5) decision support systems are used when the decision is semi-structured
or unstructured;
6) decision support systems incorporate a database of some sort; and
7) decision support systems incorporate models.
One word that attracts us is “Model”. Let us see the following figure that
describes a simple DSS model :

Fig. 7.12 : DSS Model

As can be seen, the decision knowledge emerges from the quantified

data using statistical and data mining tools, predictive models and the
assessment tools. The qualified data means that the data used to derive
quality information must be relevant, accurate, complete, authenticated, up-
to-date, in-time available, and easily accessible. Data warehouse is basically
repository of organizational data. You will learn about data warehousing
and data mining in other Unit ahead.
We also come across Group DSS for taking group decisions using
decision support system. GDSS are interactive computer-based systems
that facilitate decision-makers working together as a group to arrive at a
solution for unstructured problem. The GDSS provides mechanisms to help
the users to coordinate and keep track of on-going projects, allow them
to work together thru computer-supported communication, collaboration,
and coordination. Typical applications of GDSS include email, awareness
and notification systems, videoconferencing, chat systems, multi-player
games, and negotiation systems. The software developed for GDSS focuses
principally on assisting brainstorming and mechanizing voting, two of the
rare events in business meetings. Group support systems are designed to support
group decision-making through specialized software, hardware and decision
support tools. This can be defined as a combination of computer, communications
and decision technologies working in tandem to provide support for problem
identification, formulation and solution generation during group meetings. Broadly,
the fundamental goal of GDSS is to support the exchange of ideas, opinions, and
preferences within the group.

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Information Systems GDSS are believed to improve the quality of group decisions by minimizing
process losses and maximizing process gains. Process gains occur when
certain aspects of the meeting improve the eventual outcome or result and
process losses delay or reduce the final outcome. Thus, the overall meeting
outcome is reliant upon the process gains versus the process losses.
Among other terms used in GDSS like Groupthink, Communication Media
Richness, Groupware ther is a term War room used in GDSS. It is basically
the electronic meeting room or electronic boardroom, created for GDSS by
networking computers for each member participant. It is equipped with a
large screen video display that can be seen by all the participants. There is a
facilitator to control the display and have access to all member’s computers.
The software used have the capabilities to plan a session and group members
can propose agenda items through it. It can organize and structure member’s
comments and can record them as organisational memory for longer and
effective use. These days, we come across many such tools available for
group meetings apart from those available in social media.
To build a DSS in organization, one has to consider the spectrum of DSS that
organization is going to use. The following are to be well thought-out to approach
systematically :
●● Strategic, tactical and operational decisions of the organization,
●● Unstructured, semi structured and structured decisions,
●● All levels of management and knowledge workers in the organization,
●● Major functions, product or line of business,
●● Hierarchy in operations, and
●● Geographical division of the organization.
7.10.3 Executive Information System
An Executive Information System (EIS) is a support system for
executives of an organization. It is a kind of decision support system used in
organizations to help executives in decision making. It does so by providing
easy access to important data needed in an organization to achieve strategic
goals. It is used for monitoring organization’s performance and also for
identifying opportunities and problems.
Today every performing organization has its own website and connectivity
in terms of intranet and also through internet integrating all of its branches at
distant locations. Employees can access company data to help make decisions
in their workplaces, departments, divisions, etc. This enables employees
to provide relevant information and ideas, advises and suggestions for
betterment of the organization.
EIS as a support system is intended to be used directly by senior
managers to support unscheduled strategic management decisions. Often
such information is external, unstructured and even uncertain. The key
characteristics of EIS are :
●● Detailed data – EIS provides absolute data from its existing database.
●● Integrate external and internal data – EIS integrates external and
internal data. The external data collected from various sources.
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●● Presenting information – EIS represents available data in graphical Transaction Processing
form which helps to analyze it easily. Systems, DSS, and EIS

●● Trend analysis – EIS helps executives of the organizations to data

prediction based on trend data.
●● Easy to use – It is a very simplest system to use.
7.10.4 Difference between MIS, DSS, and EIS
With the exposure to all the above information systems, let us find out the
differences between DSS, MIS, and EIS. Table 18.2 enlists some basic
differences between DSS, MIS and EIS. As the name implies, the later two
are the systems that provide information that may or may not be used for
making a decision whereas the support information provided for deciding
on the policy, planning or implementation is the basic component of DSS.
Let us find out the characteristics of the three systems:
DSS
●● DSS generally provide support for unstructured, or semi-structured
decisions (decisions that cannot be described in detail)
●● DSS problems are often characterized by incomplete or uncertain
knowledge, or the use of qualitative data
●● DSS will often include modeling tools in them, where various
alternative scenarios can be modeled and compared
●● Investment decisions are an examples of those that might be supported
by DSS
MIS
●● MIS is generally more sophisticated reporting systems built on
existing transaction processing systems
●● Often used to support structured decision making (decisions that can
be described in detail before the decision is made)
●● Typically will also support tactical level management, but sometimes
are used at other levels
●● Examples of structured decisions supported by MIS might include
deciding on stock levels or the pricing of products
EIS
●● EIS supports a range of decision making, but more often than not, this
tends to be unstructured
●● EIS supports the executive level of management, often used to
formulate high level strategic decisions impacting on the direction of
the organization
●● These systems will usually have the ability to extract summary
data from internal systems, along with external data that provides
intelligence on the environment of the organization
●● Generally these systems work by providing a user friendly interface
into other systems, both internal and external to the organization
Let us now explore differences among the three information systems based
on the dimensions (Table 9.4).
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Information Systems Table 7.4: Difference between DSS, MIS and EIS
Dimension DSS MIS EIS
Focus Analysis, decision Information Status access
support processing
Typical users Analysts, professions, Middle, lower levels, Senior executives
served managers (via sometime senior
intermediaries) executives
Impetus Effectiveness Efficiency Expediency
Application Diversified areas Production control, Environmental
where managerial sales forecasts, scanning, performance
decisions are made financial analysis, evaluation, identifying
human resource problems and
management opportunities
Database(s) Special Corporate Special
Decision Supports semi- Direct or indirect Indirect support,
support structured and support, mainly mainly high level and
capabilities unstructured decision structured routine unstructured decisions
making; mainly ad- problems, using and policies
hoc, but sometimes standard operations,
repetitive decisions research and other
models
Type of Information to Scheduled and News items,
information support specific demand reports; external information
situations structured flow, on customers,
exception reporting competitors and the
mainly internal environment
operations
Principal use Planning, organizing, Control Tracking and control
staffing and control
Adaptability Permits individual Usually none, Tailored to the
to individual judgment, what-if standardized decision making style
user capabilities, some of each individual
choice of dialogue executive, offers
style several options of
outputs
Graphics Integrated part of Desirable A must
many DSS
User A must where no Desirable A must
friendliness intermediaries are
used
Treatment of Information provided Information is Filters and
information by the EIS/or MIS is provided to a compresses the
used as an input to diversified group information, tracks
the DSS of users who then critical data and
manipulate it or information
summarize it as
needed
Supporting Can be programmed Inflexibility of Instant access to the
detailed into DSS reports, cannot get supporting details of
information the supporting details any summary
quickly
Model base The core of the DSS Standard models are Can be added, usually
available but are not not included or
managed limited in nature
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 Construction By users, either alone By vendors or IS Transaction Processing
By vendors or IS
Systems, DSS, and EIS
or with specialists specialists specialists
from IS or IC
departments
Hardware Mainframes, micros Mainframes, micros Distributed system
or distributed or distributed
Dimension DSS MIS EIS
Nature of Large computational Application oriented, Interactive, easy
computing capabilities, performance reports, to access multiple
packages modeling languages strong reporting databases, on-line
and simulation, capabilities, standard access, sophisticated
applications and DSS statistical, financial, DBMS capabilities
generators accounting and and complex linkages
management science
models

Adapted from the Information Systems resource materials by Denis Manley, School of Computing
at Dublin Institute of Technology.

Activity C
1) Let us take an example of a Travel Agent selecting destinations for
Clients based on the Client’s expressed interest in vacation activities
and the Agent’s knowledge of what is available in various locations.
Do you think that a computerized DSS will help in decision-making?
If not, why? If yes, how?
………………………………………………………………………
………………………………………………………………………
………………………………………………………………………

7.11 SUMMARY
In this unit, an attempt has been made to explain the importance of
information, information generation as a system and role of information
in various areas of functional management. We have discussed some of the
key points (environmental and competitive) to be kept in mind while going
for the development of information systems.
All organizations have similar needs to build up from the basic inputs a
good quality database each and then to evaluate selective data, analyzed
data, inter-linked data and aggregated data to derive suitable MIS support to
decision making at the corporate level. We have discussed various functional
management systems to illustrate with input, output and processing aspects
thus generating the organizational database to help taking business decisions
by the managers. Transaction processing was discussed as the sub system
of functional management system. EIS and DSS have been discussed with
tabulating the difference of these with MIS. Also Group DSS has been
discussed for arriving at decisions with involvement of all concerned.

7.12 UNIT END EXERCISES

1. Discuss the importance of information system for business decisions.
2. Distinguish between data, information and knowledge.
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Information Systems 3. Visit some of the organizations to identify the information systems
used for better management. Suggest the ways and means for the
improvement.
4. Identify and name some of the computerized information systems
used in production management, HRD and marketing.
5. Identify the role of transaction processing system in the development
information system.
6. List the analytical methods, which could be used effectively in the
modules of human resource management for the development of
subsystem.
7. How does a computerized Personnel Information system help in
managing human resources more efficiently?
8. Why do both EIS and DSS are required in decision making process?
Illustrate with two examples.
9. What is the role of Group DSS in arriving at decisions? Name two
such software which facilitate group meetings over internet.
10. What is the role of social media in supporting decision making process
in an organization?

7.13 REFERENCES AND SUGGESTED FURTHER

READING
Adelman, Leonard, Evaluating Decision Support and Expert Systems, New
York : John Wiley and Sons.
Clifton, H. D., Business Data Systems, Prentice-Hall: Englewood-Cliffs.
Mallach, Efrem G., Decision Support and Data Warehouse System,
New Delhi :Tata Mcgraw Hill.
McGrath, Joesph Edward (1984) Groups : Interaction and Performance,
New Jersey : Prentice Hall.
Murdick, Robert G., MIS: Concepts and Design. Englewood Cliffs, N.J.
Prentice-Hall.
Murdick, and Thomas C. Fuller., “Subsystems for MIS”. Journal of Systems
Management, June 1979.
Murthy CSR, Management Information Systems: Text and Applications,
Third Edition, Himalaya Publishing House, Mumbai
Robert G. Murdick, Joel E. Ross and James R Claggett. Information systems
for Modern Management, Prentice Hall of India.
Sadgopan S., Management Information Systems, Prentice-Hall if India
Private Limited, New Delhi, India
Walker D., Computer Based Information Systems, Elsevier Science Pub Co;
2nd edition.
https://www.includehelp.com/MIS/executive-information-system-eis.aspx
site accessed on 27th November 20121

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 Integrated Applications
UNIT 8: INTEGRATED APPLICATIONS
Structure
8.1 Introduction
8.2 Objectives
8.3 Integrated Software Applications and Their Importance
8.4 Advantages and Business utility
8.5 Implementing Integrated Applications
8.6 The Competition
8.7 Business Software Solutions from Oracle
8.8 Business Software Solutions from SAP
8.9 Business Solutions from Microsoft
8.10 Summary
8.11 Unit End Exercises
8.12 Reference & Suggested Further Readings

8.1 INTRODUCTION
Integrated application software systems have become necessary for
organizations to compete and do the business in controlled and profitable
manner. They need to choose a system that suits their business processes.
Integrated systems are the systems that help in integrating business processes
and management functions. They provide a transparent and integrated view
of all the activities that are going on in the business. Unlike earlier days,
when data used to be collected from different service divisions/nodes and
then compiled in the form of a summary report, presently the software does
the compilation and the integration work. This facilitate in maintaining
consistency of data by making same data available to all concerned in
the organization. It also minimizes the time taken in accomplishing the
work. There are many software packages that integrate the activities of
different service divisions and respective processes. This way they facilitate
businesses to devote more time on productivity. However there are different
needs of different business and one should be careful in deciding about a
software system that would be useful to the organisation. Any company
looks for these packages to integrate its corporate functions like finance,
manufacturing, customer relations, human resources and so on. This is a
critical activity for organisations. As a successful manager you should be
able to understand the system requirement of your company. You should
be able to define the information flow, information requirements and
information usage so that you gain competitive edge. This unit is thus an
attempt to keep you updated on the latest in the business solutions area.

8.2 OBJECTIVES
After reading this unit you should be able to
●● Explain the concept of integrated software applications;
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Information Systems ●● Describe their advantages, business utility, and implementation
issues; and
●● Discuss the business solutions offered by market leaders.

8.3 INTEGRATED SOFTWARE APPLICATIONS

Literal meaning of “Integration” is combination or amalgamation. In terms
of computer terminology, “Integration” is a broad term for any software that
serves to join together separate and usually already existing applications.
Integrated software applications for business give you the ability to integrate
the diverse information sources pertaining to your business holistically into
a single framework. This integrated information can then be shared by
applications such as Customer Relationship Management (CRM), Supply
Chain Management (SCM), Business Process Re-engineering (BPR)
systems as so on. The amalgamation of integrated software applications is
called Enterprise Resource Planning, widely known as ERP.
Now, let us see these terms with regard to their respective definitions with
little more about them:
ERP: Short for Enterprise Resource Planning is a business process
management system that integrates all facets of the business, including
planning, manufacturing, sales, marketing, and front-end services like
human resource management and finance management covering accounting,
budgeting, deposits etc. The term ERP was coined by the research firm
Gartner around 1990. As the ERP methodology has become more popular,
software applications have emerged to help business managers implement
ERP in business activities such as inventory control, order tracking,
customer service, finance and human resources. Integrated software
applications are available now for almost all business houses automating
many back office functions related to technology, services and human
resources. They can also be widely seen today in use for various services in
Hospitals, Banking, Education and many more. ERP systems are now vast
repositories of information helping organizations to generate reports that
can spotlight the performance of every aspect of the business. There are
countless applications available, designed for different industries, business
models and challenges, and ERP acts as command central for a vast network
of application software.
CRM: Short for Customer Relationship Management entails all aspects of
interaction a company has with its customer, whether it is sales or service
related. Computerization has changed the way companies are approaching
their CRM strategies because it has also changed consumer-buying
behavior. With each new advance in technology, especially the proliferation
of self-service channels like the Web, Bluetooth and WAP (Wireless
Application Protocol) phones, more of the relationship is being managed
electronically. Organizations are therefore looking for ways to personalize
online experiences (a process also referred to as mass customization)
through tools such as help-desk software, e-mail organizers and Web
development applications. Today we find sales and customer services
related communications very actively and promptly disseminated through
emails, messaging services, social media giving the comfort to consumers
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of getting updated in no time. Once we place an order for purchase of some Integrated Applications
items through online we get instantly updated about status of order and
other related business activities such as payments confirmation etc.
SCM: Short for Supply Chain Management, the control of the supply
chain as a process from supplier to manufacturer to wholesaler to retailer to
consumer. Supply chain management does not involve only the movement
of a physical product (such as a microchip) through the chain but also,
like CRM, any data that goes along with the product (such as order status
information, payment schedules, and ownership titles) and the actual entities
that handle the product from stage to stage of the supply chain.
There are essentially three goals of SCM: to reduce inventory, to increase the
speed of transactions with real-time data exchange, and to increase revenue
by satisfying customer demands more efficiently maintaining unified
communications at all levels giving the present status to the customers.
It is used in reference to software applications that enable more efficient
management of the supply chain.
BPR: Short for Business Process Re-engineering is aimed to make radical
changes in an organization from the ground up in an aim to improve
performance and make more efficient use of resources. It focuses on
the analysis and design of workflows and business processes which are
nothing but the steps and procedures that govern how resources are used
in the organization to meet the needs of customers or markets. It helps
organizations to fundamentally rethink how they do their work in order
to improve customer service, cut operational costs, and compete globally.
During the process of re-engineering it uses IT to organize data, doing
data analysis, and maintain project trends etc. for success of the business.
Using the technological innovations organizations going for re-engineering
replace old methods of business operations with cost-saving innovative
technologies by using integrated software applications to radically transform
business operations. Re-engineering focuses on re-designing the process as
a whole in order to achieve the greatest possible benefits to the organization
and their customers.
Importance and use of software applications for various services in
organizations is well known today. We hardly find any sector today
untouched by computers. Be it education, factory, agriculture, banking,
hospitals, Research & Developments, Government offices everywhere we
find use of computers for the daily business and various services. Now
companies are giving high importance to software integration without
which it is almost impossible to compete in the market. Today nobody wants
to access data stored in multiple systems. They want to build strong links
between business systems and make information flow better. Let us take
an example, suppose you want to place an order online using your smart
phone or laptop or desktop computer. For connectivity you have to have,
of course, the internet. An integrated software solution, on one hand, takes
that order, shifts it and allocates them to the manufacturing plant and on
the other hand places order for the raw materials on the basis of the stock,
updates the financial position of the company with respect to suppliers and
the inventory and so on. Many people have given different names to the
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Information Systems integration of ERP, SCM, BPR and CRM. These names include online
business or e-business, c-business (collaborative e-business), m-business or
mobile business etc.
There are many software that do these integration activities. At present, in the
year 2021, the top ten software systems for the business process integration
are SAP Business One, NetSuite, SAP, Sage Intacct, SAP S/4HANA,
Acumatica, Tally, Odoo ERP, SAP ByD, and Oracle EBS (Source: https://
www.g2.com/categories/erp-systems, 9th August 2021). Rating is based on survey
taken by the company primarily with the user satisfaction level and the
popularity . Microsoft Dynamics NAV is another such system by Microsoft
for process integration. It is worth mentioning here that Odoo ERP is Open
Source Software meaning thereby that software codes are available to users
for using almost free. Users have to further modify them as per the specific
requirements. Unlike Proprietary software, it does not require user licenses
to use the software. But it does require in depth knowledge of software
coding to understand and modify to suit the user requirements. There are
many such open source software in the market. To name few of them Adaxa
Suite, ERP5, ERPNext, inoERP, LedgerSMB, SQL-Ledger, WebVella etc
are available globally. With the advancements in IT, all these services are
also available with just a click on web link with computer servers and storage
systems . Users do not have to worry about space, neither for electricity
or air-conditioning for physically keeping servers and storage systems at
their premises. All are available in Cloud i.e. physically at other IT service
provider location.

8.4 ADVANTAGES AND BUSINESS UTILITY

Integrated software packages help in real business growth. Seeing the wide
spread availability of such solutions from IT solution providers, companies
today put on priority to integrate their diverse business processes to simplify
operations for faster decision-making. Companies realise that if they have to
survive and grow, they have to use tools that can provide quicker and useful
information and cut costs to increase efficiency. IT has given businesses
a chance to generate information in real-time and thus grab opportunities
that were non-existent or unseen earlier. With the development of cutting-
edge technology, we have seen evolution of many systems that has adapted
market demands. IT is readily providing business solutions now. Even
complete project undertaken by a company can be very well managed and
monitored today using Project Management Systems (PMS). They are
designed to assist project managers and their teams organize the step-by-
step process of a project, identify priorities, and monitor project tasks, costs,
contacts, deadlines and staff. Complex projects that require staff, team
coordination, budgets and so on can be difficult to manage without the use
of project management software. Similarly, Business Intelligence (BI) tools
are also available for analytical study for making the business more and
more successful.
The integrated software solutions provide a platform to integrate all
processes in an organization enabling it to plan, trace and see its 4-m
resources (materials, machines, men and money) in the best possible ways
to service customers and reduce costs. If you want that your Business should
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survive with low overheads and still run efficiently then you have no choice Integrated Applications
but to opt for IT solutions.
Today, a typical business solution is an integration of ERP, BPR, SCM, CRM,
BI, and PMS. While ERP can take care of functions like accounts production
planning, payroll and marketing etc., BPR can be used simultaneously to
cut-down on all non-value added business processes and paperwork. These
systems are the enablers of change in the business for better. With the help of
these systems your business can compete better. These systems, combined
with the web, help you to reach your customers most cost-effectively.
There would be no cost incurred on travel and communication and no cost
incurred on setting up offices and employees. The Cloud services available
with almost all big players in the market have made the task of maintaining
integrated system much more simpler as compared to yesteryears.
E-Business generations are well explained with a pictorial representation
in the Figure 8.1 . By this you would be able to appreciate why we are
talking about integrations and business solutions and what place it has in
the present world. It can be seen that 4th generations business solutions
are using web to integrate all systems. ERP is used in a broader term here.
In fact the term ERP is the synonym for integration of all the software
catering to various business processes in organizations. Worldwide this
term i.e. ERP is used now for the total integration of business processes.
The software modules, BPR for reengineering the business processes and
PMS for project monitoring are used too for the respective tasks. Similarly
BI is used as the analytical tool for estimating and forecasting supports
for the business based on primary data (at the organization location) and
secondary data available through web for the analysis and inferences.

4th

3rd

2nd

1st

Putting a website
on the Internet

Online e-commerce shop

on Internet

Using CRM & SCM to connect

Suppliers and Customers

Running your entire company using

web-based ERP, BPR and PMS

Figure 8.1: Generations of e-Business

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Information Systems Here you should be clear that e-business is similar to e-commerce but
it is more than just a simple act of buying and selling services or goods
online. In fact, it is the method of utilizing digital information and advanced
communication technologies to streamline different business processes
– from the initial to implementation phase. E-commerce is just a part of
e-business.

8.5 ISSUES IN IMPLEMENTING INTEGRATED

APPLICATIONS
The key to establishing a good IT system lies in the proper planning.
Businesses should first specify their needs, processes and key data. They
should clearly specify the kind of information and its flow. Once these
specifications are done, it is the integration of information that is required.
Once integration is done, information is accessible to every department
around the company. Customers, suppliers and others may also be provided
with the facilities to access relevant information with proper access rights,
say, status of order, supply, delivery etc.
In most of the cases organizations hire the services of IT service providers.
These facilities being from third party require comprehensive study and
analysis of business requirements to have the integrated system in place.
As-Is and To-Be processes must be well documented for reference now and
then by both – the organization and the service provider. As-Is document
contains all what is required to be automated and integrated. Process owners
available in the various departments of the organizations are the key persons
to put forth the existing processes which the organization has been using.
This may also contain new requirements to be automated and made part of
the new system. ERP and other software packages available for automation
are required to be customized to suit the organization. The To-Be document
must have mention of all automated and integrated processes which would
be delivered to the organization by the IT service provider after completion
of the project. As the end result will be the integrated system hence any
small mistake at any stage may have great impact on the business and system
may halt. Hence all process users must be involved right from giving the
requirements and they must be available till the delivery and acceptance.
Implementations of new system – automated and integrated applications
will never be a success till above is done.
Selecting the right service provider is another issue. Selecting the best and
most cost effective solution depends on developing the RFQ/RFP containing
the ‘What’ part of the solution requirement comprehensively. RFQ (Request
For Quotation) or RFP (Request For Proposal) must contain all requirements
that each user department needs in terms of the various outputs/reports once
the new integrated software is in place. You will study further about these
terms in the Unit on Systems Analysis and Design.
ACTIVITY A
Take the case of your organization or any other organization of your choice.
Classify the activities of the organization with respect to the generations of
e-business. Mention all the features by virtue of which you have done this
classification.
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 Integrated Applications
8.6 THE COMPETITION
In this Unit we would introduce to some of the leading players providing
IT based business solutions. But before entering what these players are
offering, let us see the interesting competition that has been in past and
what is prevailing presently.
In fact competition amongst application software developers started
way back in 1960s-70s when MRP (Material Requirement Planning) got
developed to automate inventory and production business processes in
some manufacturing plants. Eventually, several large software providers,
including Oracle and JD Edwards (now taken over by Oracle), set out to make
this software accessible to more businesses. The ‘80s marked a milestone in
the history of application integration when the first manufacturing resource
planning (MRP II) systems appeared to support manufacturing processes
beyond inventory and raw materials procurement. MRP II systems allowed
the various departments involved in manufacturing to coordinate, and they
had more advanced production scheduling capabilities.
By 1990, Gartner, as stated earlier, introduced the term ERP to recognize
that many business functions, like accounting, sales, engineering and human
resources (HR) apart from manufacturing were now using this technology to
increase the efficiency of their entire operations also facilitating all employees
with a single source of accurate data. Cloud ERP, came into existence first
by NetSuite in 1998 bringing an improvement over on-premises systems.
With this, available with all the main IT service providers, organizations
can access critical business data through the web from any device with an
internet connection with no longer need to purchase and maintain hardware.
It also reduces the need for IT staffers and implement easily. This cloud
model has made ERP systems, once limited to enterprises, accessible to
smaller companies that lack the capital to launch and support a resource-
intensive on-premises solution. Small and midsize businesses across
industries can enjoy the same benefits as their larger counterparts, including
automated processes, improved data accuracy and greater efficiency.
Integrated application systems have come a long way and technological
innovations will lead to continued advancements with integration of
Artificial Intelligence (AI) into them.
There are more than 100 ERP systems available worldwide for Small
Business, Mid-Sized, Fast-Growing, and Large Enterprise. A survey based
on 129 products indicates that top five companies providing integrated
applications are /Oracle, SAP, SAGE, SYSPRO, and Microsoft. (Source :
https://www.selecthub.com/erp-software/).
For comparison, we will take up the integrated applications with Oracle,
SAP, and Microsoft, most popular globally, with their diversified products .

8.7 BUSINESS SOFTWARE SOLUTIONS FROM

ORACLE
The integrated applications under the umbrella of Oracle are Oracle’s
E-Business Suite, JD Edward’s EnterpriseOne, Hyperion, Peoplesoft, and
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Information Systems Siebel. Oracle took over JD Edward in 2005. JD Edward, earlier to it, had
taken over Peoplesoft.
Oracle’s E-Business Suite (EBS) offers a complete set of applications,
which are capable of automating entire business processes encompassing
wide array of functions.
EBS Mobile Release 9 also updates to smart phone apps. EBS Cloud
Manager helps enterprises to run EBS on Oracle Cloud Infrastructure (OCI).
Oracle EBS is an integrated set of business applications that deliver
comprehensive procedural computerization and thus complete information.
Information finally helps businesses in taking more informed decisions.
Thousands of the world’s leading organizations rely on Oracle E–Business
Suite to run their key business operations. Oracle Cloud Infrastructure,
helps you save money, gain productivity, and respond to changing business
demands with automated, scalable cloud infrastructure. Table 8.1 gives you
a global view of different modules of Oracle E-Business Suite. Apart from
the EBS, Oracle also provides business technology platform for database
and data management, application development and integration, Analytics,
and intelligent technologies for doing businesses in state-of-the-art areas
and applications.
Table 8.1 : Oracle solutions under its E-Business Suite
S. Solutions/
Description
No. Modules
1 Financials Oracle Financials is an integrated solution that gives you complete
visibility into your finances and control over all transactions,
while increasing the efficiency of your operations. It covers
Receivables, Payables, Assets, Lease Contracts (Financials),
Lease and Finance Management.
2 Human This solution readies your company for human resources to
Capital rapidly deploy the best for maximum employee productivity,
Management satisfaction, and retention.
3 Business Business intelligence solutions help you meet the information
intelligence needs of your users by providing self-service, Web-based
access to information. It provides hundreds of pre-built reports
and analytic capabilities. Oracle addresses the full spectrum of
business intelligence requirements, such as data quality, data
analysis, and information access.
4 Learning Learning Management module provides a complete infrastructure
Management that lets organizations manage, deliver, and track training, in both
online and classroom environments.
5 Maintenance Maintenance Management module helps you plan and execute
Management maintenance activity for any asset, as well as keep track of
information on asset costs and activities throughout an enterprise.
6 Manufacturing Manufacturing module is a set of collaborative applications
that optimize production capacity beginning with raw materials
through final products, regardless of the manufacturing
methodology used with Discrete Manufacturing, Process
Manufacturing, Outsourced Manufacturing, Cost Management,
Quality etc.
7 Marketing Oracle Marketing integrates with Sales, Finance and the rest of
your organization, for better planning and execution. It drives
profit by intelligently marketing to the most profitable customers.
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 Integrated Applications
8 Order Order Management uses Oracle Workflow to support tailored,
Management automated fulfillment processes, without the need for
customization. It captures demand from multiple channels using
a variety of communication methods with Order Management,
Inventory Management, Advanced Pricing, Shopping Experience,
Landed Cost Management, Channel Revenue Management,
Incentive Compensation
9 Procurement Procurement is an integrated set of applications that connects all
your purchasing functions, including sourcing, purchase order
management, receiving, and payables, to give you a central
repository of purchasing information, along with fully automated,
self-service capabilities for Shopping, Procurement etc.
10 Product Oracle Product Lifecycle Management is collection of
Lifecycle applications that gives you a centralized repository of product and
Management project information that will help you manage product activities
collaboratively.
11 Projects Projects, a set of Internet-enabled applications, delivers
centralized project management functionality and serves as a
bridge between operations and corporate finance to help you
effectively manage the full lifecycle of every project, Project
Procurement, Contract Lifecycle Management etc.
12 Sales Sales enables you to have comprehensive customer and prospect
information so that your sales organizations can meet challenging
revenue goals with fewer resources. .
13 Supply Chain Supply Chain Management lets you gain global visibility,
Management automate internal processes and readily collaborate with your
suppliers, customers, and partners.
14 Asset Life It helps enterprise Asset Management, Asset Tracking, Service
Cycle and Contracts, Service (TeleService), Field Service, Depot Repair etc.
Service

(Source: https://www.oracle.com/a/ocom/docs/applications/ebusiness/announcing-ebs-
innovations- 2020.pdf)

8.8 BUSINESS SOFTWARE SOLUTIONS FROM

SAP
SAP (System Analysis and Program Development) was founded on April
1, 1972 in Germany by five former IBM employees with an idea to create
standard enterprise software that could integrate all business processes and
enable data processing in real time. Their products gained prominence with
the application suite “R/3” in 1992 with the client-server software smoothing
the path to a globalized economy, turning SAP into a global player. The
company branched out into three markets of the future: mobile technology,
database technology, and cloud. SAP acquired some of its competitors,
including Business Objects, Sybase, Ariba, SuccessFactors, Fieldglass, and
Concur. SAP has more than 238 million cloud users currently, more than 100
solutions covering all business functions, and the largest cloud portfolio of
any provider. SAP operates 70 data centers at 37 locations in 17 countries.
SAP HANA was launched in 2011 giving very fast access to customers.
Data analyses that used to take days or even weeks were now completed in
seconds. Four years later, SAP launched SAP S/4HANA, its latest generation
of business software. In 2019, SAP acquired U.S. company Qualtrics, a
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Information Systems leader in experience management software, placing SAP at the leading edge
of this growing segment. The company’s integrated applications connect
all parts of a business into an intelligent suite on a digital platform. SAP
Business Technology Platform powers customers to become intelligent
enterprises and supports cloud, on-premise, and hybrid customer landscapes.
Integrated Applications by SAP is the Business Suite which is a bundle of
end-to-end enterprise software applications integrating data, processes and
the business functions. SAP’s solutions are available for many industries
like aerospace & defense, engineering, construction, operations, financial
service providers, insurance, telecommunications and banking etc.
Business Suite is used primarily by medium to large enterprises. It helps to
run businesses better, faster, and simpler enterprise-wide responding more
quickly to changing customer needs and market conditions. It includes
CRM, Financials, HR, SRM, SCM and many more. The table given below
describes them. The foundation of Business Suite is SAP ERP, often referred
to as ERP Central Component (ECC). The Table 8.2 gives you a global view
of different modules of SAP ECC.
Table 8. 2: SAP solutions under its business suite SAP ECC
S. Solutions/ Description
No. Modules
1 Financial The FI component records a company’s all financial transactions.
Accounting It handles receivables from sales, payables for procurement, and
(FI) cash management as well as bank payment and reconciliation
processes.
2 Controlling The CO component manages cost center accounting, profit center
(CO) accounting and internal orders and also offers financial planning.
It’s product costing feature is used to compare simulated costs
and actual costs primarily intended to help manufacturing
organizations. Together FI and CO are often referred to as FICO,
FI-CO or FI/CO.
3 Sales and The SD component manages major processes of sales and
Distribution distribution. This includes selling products or services in national
(SD) and international markets through direct sales to customers or
through distribution networks. It also handles customer’s returns,
along with billing and credit issuance.
4 Materials The MM component manages procurement, from local vendors
Management or international suppliers, and inventory for all goods issuance,
(MM) goods receipts and transfers of a material from one plant or storage
location to another. Counting and reconciling materials’ physical
inventory is also managed in MM.
5 Production The PP component helps businesses create demand and
Planning manufacturing capacity alignment to help plan product
(PP) manufacturing, sales and distribution. It can be used for discrete,
process or repetitive manufacturing.
6 Quality The QM component extensively integrates with procurement,
Management production, sales, and equipment maintenance processes. It can
(QM) be used to manage complete internal or external audit’s business
processes. It can also assist in finding root causes of a product’s
failure to ensure ongoing quality improvements to a company’s
business processes.

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 Integrated Applications
7 Plant The PM component monitors machines and functional locations
Maintenance (such as a chiller room or a boiler room) to make sure that they are
(PM) in proper working order providing alerts when issues are detected
to prevent machine failures and production disruptions. Business
processes such as preventive maintenance, corrective maintenance
and refurbishment maintenance are all covered in this module.
8 Customer The CS component handles business processes related to
Service (CS) a company providing maintenance services to customers’
equipment.
9 Project PS is meant to manage large, complex projects such as setting up
System (PS) a new manufacturing plant or monitoring a plant’s maintenance
turnaround. All project-specific procurement or production
through PS ensures that this component is able to allocate a
project’s costs correctly while remaining within the defined
project’s budget.
10 Human HR is used for payroll, time management activities such as
Capital attendance and leaves, career development, travel and workplace
Management safety.
(HCM)
11 Customer It focuses on sales and marketing, SAP customer experience
Relationship solutions, customer data, marketing, commerce, sales, and service
Management
(CRM)
12 Supplier It covers procure-to-pay and collaborative service procurement
Relationship
Management
13 Product It helps to manage a company’s product lifecycle needs
Lifecycle
Management
14 Supply It focuses on business planning, logistics and order fulfillment
Chain with supply chain planning, supply chain logistics, manufacturing,
Management and enterprise asset management

(Source: http://www.sap.com/ )
SAP also provides state-of-the-art business technology platform for database
and data management, application development and integration, Analytics
and intelligent technologies for digital transformation, machine learning,
Blockchain, Internet of Things, Cloud Computing, Big Data. You will study
about these terms for better understanding in further Units.
We will now have a look at the business solutions offered by Microsoft.

8.9 BUSINESS SOLUTIONS FROM MICROSOFT

Microsoft Business Solutions offers integrated business applications. It
creates applications and services for retailers, manufacturers, wholesale
distributors, and service companies like the other two players covered in
earlier Sections. The Microsoft product which provides integrated business
solutions is known today as Microsoft Dynamics 365. With Dynamics
365, customers have the only portfolio of intelligent business applications
that empowers everyone to deliver operational excellence and create more
engaging customer experiences. Dynamics 365 applications can be easily
connected with the systems and tools which are already in use by customers
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Information Systems to add and extend capabilities for the existing capabilities in order to
accelerate the business growth with optimized operations connecting with
every customer in more innovative way with mixed reality and Internet of
Things (IoT).
MS Dynamics 365 has about 12 standard application modules which can be
integrated as one software solution. Based on the requirements customers
can select one, some, or all application modules for the business growth.
The modules are Finance and Operations, Retail, Human Resource, Sales,
Customer Service, Project Service Automation, Field Service, Marketing,
Supply Chain Management, Artificial Intelligence(AI) for Sales/Customer
Service/Market Insight, Mixed Reality for Remote Assistance and Layout,
Business Central as ERP for SMBs i.e. for Small and Middle level
Businesses. Apart it has eCommerce module for online shopping, marketing,
and eCommerce activities. Microsoft itself uses the Customer Service
module to manage the process of updating Windows operating systems and
other software resources, provided by them, to the latest versions. Further,
MS Dynamics eShop Sales Portal is fully-integrated with a simple user
interface built for in-house sales representatives. With eShop, sales team is
sufficiently equipped with all what they need to maximize sales and provide
great customer order management. Table 8.3 gives you a global view of
different application software modules of Microsoft Dynamics 365.
Table 8.3: Microsoft’s Integrated Applications
S. Applications/ Description
No. Modules
1 Marketing To create connected customer experiences, find and nurture
new customers, stay on top of the market trends, strengthen
relationships and earn loyalty, help with compliance requirements
and protect customer data. Easily customize and connect with
tools you already use. Personalize customer experiences with AI.
2 Sales It can be used to find and build stronger relationship, improve
productivity and performance, to get a single view of customers,
explore e-books, videos, webinars etc.
3 Customer To deliver positive customer experiences faster, optimize
Service resources and help technicians to be more efficient, reduce
operational costs, quickly address and resolve issues using AI-
powered virtual agents, freeing agents to handle more complex
matters. To deliver immediate access to the right content at the
right time, collaborate, share tips, and leverage rich insights
from experts and external users.
4. Field Service To ensure consistent and dependable operations by predicting,
detecting, and resolving service issues before customers even
know there’s a problem. To deliver exceptional onsite customer
experiences while optimizing resources and costs by dispatching
technicians when and where they’re needed most.
5. Finance To automate finance management processes to increase
efficiency, decrease operational expenses and financial
complexities, improve financial controls, and make timely
decisions to drive agility and growth using comprehensive, real-
time financial reporting, embedded analytics, and AI-driven
insights, minimize costs and optimize spending across business
geographies with process automation, budget control, and
financial planning and analysis.
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 Integrated Applications
6 Supply Chain To connect operations across small or medium-sized business,
Management predict disruptions and respond fast by digitizing the supply
chain, enhancing visibility, improving planning, and maximizing
asset productivity.
7 Business To ensure business continuity with a cloud solution that connects
Central sales, service, finance, and operations teams to help them adapt
faster and deliver results.
8 Project To connect project-centric business in one application, get the
Operations visibility, collaboration, and agility needed to drive success
across project-centric business—from prospects to payments to
profits.
9 Commerce To unify physical and digital commerce, build brand loyalty
through personal engagement, and exceed customer expectations.
10 Human To take the work out of managing the workforce, streamline and
Resources optimize processes, empower employees with skill development
and set them up for success.
11 Manufacturing To coordinate entire manufacturing process from product
configuration, supply and capacity requirements planning, to
scheduling and managing shop floor.
12 Retail To run retail operations from point-of-sale to delivery, increase
Management customer flow, speed up lines and tasks, control inventory, and
automate purchasing.

(Source: https://dynamics.microsoft.com/en-us/)
So, you can see that there is a solution for virtually every thing that your
business needs. For all type of business i.e. Small, Medium, or Large,
integrated application solution is available worldwide with state-of-the-art
technologies. It is up to the business houses to select the right solution for
the respective requirements.
Activity B
Go to the websites of Oracle and SAP, list down five business advantages
or competitive edge that their customers achieved after the implementation
of their business solution.
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………

8.10 SUMMARY
Integration of business solutions has emerged as a basic requirement of
business today. No one wants to wait for the information coming from
various departments and then compile for further use. Technology available
today is well capable of providing right information at the right time. It
is up to the user to decide what they want. Right from IT infrastructure
to integrated application software, everything is available with no hurdle
of devoting much time towards change over from the previous practices.
Integration of business solution has emerged as an important tool here.
They connect your customers, suppliers, employees any time and all the

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Information Systems time from any where. Thus it works for your whole business and not just
one department. The unit has tried to explain the concepts of integration and
has highlighted the solutions, which are available in the market today.

8.11 UNIT END EXERCISES

1. What are the technology related challenges that are invisible to
your organization? Highlight the pitfalls? How integrated software
applications can help in this?
2. What are integrated software applications? Talk about their advantages
and business utility.
3. Write notes on the business software solutions provided by
a. SAP
b. Oracle
c. Microsoft
4. Compare the Business solutions provided by Microsoft and SAP.
Clearly highlight the features which are common between the two.
5. Compare the Business solutions provided by Oracle and SAP. Clearly
highlight the features which are common between the two.

8.12 REFERENCE & SUGGESTED FURTHER

READINGS
https://www.webopedia.com , August 3, 2021
https://en.wikipedia.org , August 5, 2021
https://www.g2.com/categories/erp-systems, August 9, 2021
https://www.netsuite.com/portal/resource/articles/erp/erp-history.shtml,
August 13, 2021
https://terillium.com/comparing-types-of-erp-systems-for-your-
organization/, August 12, 2021
https://www.selecthub.com/erp-software/ August 12, 2021
https://www.oracle.com/a/ocom/docs/applications/ebusiness/announcing-
ebs-innovations-2020.pdf , August 15, 2021
https://www. searchsap.techtarget.com, August 17, 2021
https://en.wikipedia.org/wiki/Microsoft_Dynamics_365 , August 18, 2021
https://dynamics.microsoft.com/en-us/what-is-dynamics365/ , August 18,
2021
https://www.dynamicseshop.com/integrated-mobile-solution-for-
dynamics-365-ERP , August 18, 2021
http://www.sap.com/ for information about SAP Business Solutions

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