MANAGEMENT

INFORMATION SYSTEMS
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CHAPTER 1

INTRODUCTION TO MANAGEMENT INFORMATION SYSTEMS

1.1 What is a management information system (MIS)?

Introduction
In this unit we are going to discuss the meaning and some important aspects of management information
system. According to the Systems Approach of Management, an organization is a sum of the interrelated parts
or sub systems. The management is responsible to make relations amongst these Sub-Systems into a total
system. For this purpose Management Information System (MIS) becomes an unavoidable part of any
organization. Management Information System is a systematized cyclic pattern of communication. By this
System, organizations cannot achieve their goals.
System

This is an organized grouping of components having certain interrelationships and working collectively to
achieve a set of objectives. The system approach is a method or framework which helps us to analyze and
explore the operations and interactions which exist in the systems around us.
Any given system possesses the follow characteristics or attributes:-
1. Organization – This is the arrangement of components that help to achieve objectives.
2. Central objective – Among the interacting components there has to be goals or objectives focused by all.
3. Interaction – This is the manner in which each component functions with other components of the
system.
4. Interdependence – This means that parts of the organization or system depend on one another.
5. Integration – This is concerned with how a system is tied together.
Elements of a System
1. INPUT – These are components that are required to be processed so as to give the output. This includes
raw materials, energy and human labor.
2. OUTPUT – This is the product of processing e.g. goods or a service.
3. PROCESSING – This is the transformation or conversion procedure of input into output. i.e. production
department or factory.
4. CONTROL – this element guides the system. In an organization this is the decision making body that
controls the pattern of activities, governs input, processing and output e.g the management of a
company.

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5. FEEDBACK – Control in a dynamic system is achieved by feedback which is the measure of output
against the standard.
6. ENVIRONMENT – This is the source of external elements that interact with the system or exert
pressure e.g. customers, suppliers, government policies and competition.
7. BOUNDARY – This are the limits that identity its components, processes and interrelationships when it
interfaces with another system e.g. in a company the invoicing function could be undertaken by the sales
department whereas in another it’s undertaken by the Account department.
Meaning of MIS

MIS consists of three words, that is Management, Information and System. On the basis of these three words
MIS can be defined as a system, which supplies information to Management. Actually, MIS is a process of
providing necessary information to management. It helps in planning, controlling and in taking different
managerial decisions. MIS is the structured, formal, systematic part of communication system. MIS is an
assemblage of personnel and facilities, organized into an integrated system by which relevant, adequate and
timely information is supplied to the executives.

It is to be mentioned that in respect of a large enterprise, MIS can be built around electronic computers. MIS is
not new, but only its computerization is new. Before the invention of computer, MIS techniques had existed to
supply operations. The computer has added one or more dimensions such as speed, accuracy and increased
volume of data.

Some definitions of MIS are given below

According to Kennevans, MIS is an organised method of providing past, present and projection information
relating to internal operations and external intelligence.

According to Gordon B. Davis, MIS is an integrated man/machine system for providing information to support
the operations management and decision making functions of an organization.

According to Robert G. Mardick, goel E Ross and gomes R.Claggett, MIS is the System intended to provide
information for decision making, planning, organizing and controlling the operations of the subsystems of the
firm and to provide a Synergistic organization in the process.

Definition of MIS

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Any telecommunications and/or computer related equipment or interconnected system or sub-systems of
equipment that is used in the acquisition, storage, manipulation, management, movement, control, display,
switching, interchange, transmission or reception of voice and/or data, and includes software, firmware and
hardware.
Also, a MIS is an IS that provides information to the management to enable them plan,
coordinate, control monitor and make decision by providing routine, summarizes and
exceptional report.
The focus is on the design and operation of the MIS which means that the information system is viewed as a
means of processing data, i.e. the routine facts and figures of the organization, into information which is then
used for decision making. It is changes in decision behavior which distinguish data from information.

The Figure 1.1 summarizes this approach.

MIS
User
Data processes Decisions
Information processes
flows Flows
Figure 1.1
This means that MISs are qualitatively different from data processing systems and that management
involvement and interaction between information specialists and management are the key features of successful
MIS design.
Therefore, MIS can be defined as:
A system to convert data from internal and external sources into information and to communicate that
information, in an appropriate form, to managers at all levels in all functions to enable them to make timely
and effective decisions for planning, directing and controlling the activities for which they are responsible.

To be successful an MIS must be designed and operated with due regard to organization and behavioral
principles as well as technical factors. Management must be informed enough to make an effective contribution
to systems design and information specialists (systems analysts, accountants, operations researchers and others)
must become more aware of managerial functions and needs so that, jointly, more effective MISs are
developed.

Characteristics of MIS

The management information system has the following characteristics

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1) System approach: MIS is based on the System approach. It is a step by step approach to the study of
system and its performance. Performance is made in the light of the objective which has been constituted for
that purpose.
2) Management oriented: Under MIS, necessary information is provided to each manager at the right time,
in right form and a relevant one, which is required by the management by providing information in taking
effective managerial decision.
3) Future oriented: MIS is designed and developed keeping in view the future position of the business.
Therefore, MIS should provide useful information on the basis of projections based on which future action can
be taken.
4) Integrated: MIS is designed in taking a comprehensive view or looking at the complete picture of the
interlocking sub-systems that operate within the company. It considers all aspects of production, marketing,
accounting, financing, management etc.
5) Common-data followed: MIS deals with the common data that are available in the business. MIS
provides data and information for taking effective managerial decision, which must select the real picture of the
business.
6) Long term planning: MIS is prepared for long term planning of the business. So, the designer should
avoid the outdated data and information in designing and developing time of MIS. The designer should consider
the present situation and future trend of the business activities, when MIS is designed.
7) Control database: Another important characteristic of MIS is that it always based on centralized data and
information. It is because of this fact that MIS is to supply data and information in such a way so that the
management can take its important decision.
Functions of MIS
The main purpose of MIS is to provide the management with the necessary information for decision making. In
order to achieve this purpose MIS is to perform the following functions.
1) Collection of data: The first function of MIS is to collect necessary data from both internal and external
sources of the organization. The data of the organization which have already been gathered are kept in some
physical medium such as a paper form or entering it directly into computer system.
2) Processing data: After storing the data, the next important function of MIS is to process the same. In the
processing, the data are converted to require management information, calculating company, sorting, classifying
and summarizing etc. are the necessary activities to be done for processing the data.
3) Storage of information: Under the MIS, necessary data and information are carefully stored, so that it
can save time for searching the same. Generally, data and information are stored by reserving and organizing
them in the form of files, records and databases for future use

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4) Retrieval of information: Another function of MIS is to retrieve the information to meet the exact
management information demands. So retrieval should be done as per the requirement of the management
users.
5) Disseminating: Disseminating is the last function or finished product of MIS. By disseminating the data
and information are divided and distributed to the users in an organization. This can be done through reports or
outline through computer terminals periodically.
Components of MIS and their relationship

A management information system is made up of five major components namely people, business processes,
data, hardware, and software. All of these components must work together to achieve business objects.

People – these are the users who use the information system to record the day to day business transactions. The
users are usually qualified professionals such as accountants, human resource managers, etc. The ICT
department usually has the support staff who ensure that the system is running properly.

Business Procedures – these are agreed upon best practices that guide the users and all other components on
how to work efficiently. Business procedures are developed by the people i.e. users, consultants, etc.

Data – the recorded day to day business transactions. For a bank, data is collected from activities such as
deposits, withdrawals, etc.

Hardware – hardware is made up of the computers, printers, networking devices, etc. The hardware provides
the computing power for processing data. It also provides networking and printing capabilities. The hardware
speeds up the processing of data into information.

Software – these are programs that run on the hardware. The software is broken down into two major
categories namely system software and applications software. System software refers to the operating system
i.e. Windows, Mac OS, and Ubuntu, etc. Applications software refers to specialized software for accomplishing
business tasks such as a Payroll program, banking system, point of sale system, etc.

Role of Information in an Organization

In addition to the general function of improving knowledge, information assists management in several ways
including:
• The reduction of uncertainty: uncertainty exists where there is less than perfect knowledge. Rarely, if ever,
is there perfect knowledge but relevant information helps to reduce the unknown. This is particularly
relevant in planning and decision making.
• As an aid to monitoring and control: by providing information about performance and the extent of
deviations from planned levels of performance, management is better able to control operation.

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• As a means of communication: managers need to know about developments, plans, forecasts, and
impending changes and so on.
• As a memory supplement: by having historical information about performance, transactions, results of
past actions and decisions available for reference, personal memories are supplemented.
• As an aid to simplification: by reducing uncertainty and enhancing understanding, problems and situations
are simplified and become more manageable.
Characteristics of good Management Information System
• The purpose of a management information system is to help executives of an organization make decisions
that advance the organization's goals. An effective MIS assembles data available from company
operations, external inputs and past activities into information that shows what the company has achieved
in key areas of interest, and what is required for further progress. The most important characteristics of an
MIS are those that give decision-makers confidence that their actions will have the desired consequences.

Relevance

• The information a manager receives from an MIS has to relate to the decisions the manager has to make.
An effective MIS takes data that originates in the areas of activity that concern the manager at any given
time, and organizes it into forms that are meaningful for making decisions. If a manager has to make
pricing decisions, for example, an MIS may take sales data from the past five years, and display sales
volume and profit projections for various pricing scenarios.

Accuracy

• A key measure of the effectiveness of an MIS is the accuracy and reliability of its information. The
accuracy of the data it uses and the calculations it applies determine the effectiveness of the resulting
information. The sources of the data determine whether the information is reliable. Historical performance
is often part of the input for an MIS, and also serves as a good measure of the accuracy and reliability of
its output.

Usefulness

• The information a manager receives from an MIS may be relevant and accurate, but it is only useful if it
helps him with the particular decisions he has to make. For example, if a manager has to make decisions
on which employees to cut due to staff reductions, information on resulting cost savings is relevant, but
information on the performance of the employees in question is more useful. The MIS has to make useful
information easily accessible.

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Timeliness
• MIS output must be current. Management has to make decisions about the future of the organization based
on data from the present, even when evaluating trends. The more recent the data, the more these decisions
will reflect present reality and correctly anticipate their effects on the company. When the collection and
processing of data delays its availability, the MIS must take into consideration its potential inaccuracies
due to age and present the resulting information accordingly, with possible ranges of error.

Completeness
• An effective MIS presents all the most relevant and useful information for a particular decision. If some
information is not available due to missing data, it highlights the gaps and either displays possible
scenarios or presents possible consequences resulting from the missing data. Management can either add
the missing data or make the appropriate decisions aware of the missing information. An incomplete or
partial presentation of information can lead to decisions that don't have the anticipated effects.

Approaches to system classification

There are two broad categories.

a). The pre-specific processing of day to day transactions ,known as data processing or
transaction processing and the production of regular reports analysis and information for
planning control and decision making directly by the computer.

b). the use of computers by the end –users themselves .They include managers,
accountants, office staff, sales people executive etc.

Both produce management information. The key difference is that the pre specified
systems supply pre- determined outputs and reports so there is less flexibility.

This means that great care must be taken in analyzing and determining management’s
real information .On the other hand, with the end user computing there is more flexibility
and interaction so that the emphasis becomes one of supporting the end user rather
than the production of a specified report.

Information systems can be classified by:

(a) Organizational level Supported

That is, information systems that support managers at different levels of the
organization. This classifies IS as transaction processing systems (TPS, to support
operational level), management information systems (MIS, to support middle/tactical
level), and Executive information system (EIS, to support the senior level management).

(a) Functional area supported

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These are information systems that support operations and management of different
functions within an organization. They include: financial management systems, human
resource management systems, marketing management systems etc.

(c) Support provided.

They are classified according to the support they provide. They include:

• Data processing systems/transaction processing systems

• Management information systems
• Executive information systems

(d) Management activity supported

Executive support systems (ESS)

They are designed to help senior management make strategic decisions. An ESS gathers analyses and
summarizes the key internal and external information used in the business. ESS typically involves lots of
data analysis and modeling tools, such as "what-if" analysis, to help strategic decision-making.

A good way to think about an ESS is to imagine the senior management team in an aircraft cockpit, with
the instrument panel showing them the status of all the key business activities.

Management information systems (MIS)

They are primarily concerned with internal sources of information. MIS usually take data from the
transaction processing systems (see below) and summarize it into a series of management reports.

MIS reports tend to be used by middle management and operational supervisors.

Decision support systems (DSS)

Specifically designed to help management make decisions in situations where there is uncertainty about
the outcomes of those decisions.

DSS use tools and techniques to help gather relevant information and analyze the options and
alternatives. DSS often involves use of complex spreadsheet and databases to create "what-if" models.

Knowledge management systems (KMS)

Exist to help businesses create and share information. They are typically used in businesses where
employees create new knowledge and expertise, which can then be shared by other people in the
organization to create further commercial opportunities. Good examples include firms of lawyers,
accountants and management consultants.

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KMS are built around systems which allow efficient categorization and distribution of knowledge. For
example, the knowledge itself might be contained in word processing documents, spreadsheets,
PowerPoint presentations. Internet pages etc. To share the knowledge, a KMS would use group
collaboration systems, such as an intranet.

Transaction processing systems (TPS)

They are designed to process routine transactions efficiently and accurately.

A business will have several TPS; for example:

• Billing systems to send invoices to customers

• Systems to calculate the weekly and monthly payroll and tax payments
• Production and purchasing systems to calculate raw material requirements
• Stock control systems to process all movements into, within and out of the business

Office automation systems

Try to improve the productivity of employees who need to process data and information.

Perhaps the best example is the wide range of software systems that exist to improve the productivity of
employees working in an office (for example, Microsoft Office XP), or systems that allow employees to
work from home or while on the move.

Decision support systems - expert systems

APPROACHES TO INFORMATION SYSTEMS

Social-technical Systems
The socio-technical view of organizations was developed by Trist and the Tavistock Institute and arose from
consideration that any production system requires both a technological organization, i.e. the equipment,
processes, methods, etc. and a work organization relating to those who carry out the necessary tasks to each
other, i.e. the social system. Based on this view an organization is not just a technical or social system but is the
structuring of human activities round various technologies.
The technologies involved determine the technical sub-systems and vary widely. Consider, for example, the
differing skills, procedures, machinery, equipment and the layout of facilities required in an electronics
company, a car manufacturer, a hospital or a computer bureau.
In addition to the technical sub-system, every organization has a social subsystem which consists of the
aspirations, expectations, interactions and value systems of the members. The two sub-systems - the technical
and the social -cannot be looked at separately but must both be considered as interrelating within the

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organization. Socio-technical theory suggests that the organization consists of four interrelated elements - tasks,
people, structure and technology as shown in Figure below:

Technology

Structure People

Tasks

More traditional approaches to Organizations and their problems have tended to concentrate on one or other of
the sub-systems with little or no recognition of the other.
Social-Technical View of IS
Contemporary Approaches to Information Systems

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

The technical approach emphasizes mathematically based, normative models to study information systems, as
well as the physical technology and formal capabilities of these systems. The behavioral approach, a growing
part of the information systems field, does not ignore technology, but tends to focus on non-technical solutions
concentrating instead on changes in attitudes, management and organizational policy, and behavior.

MIS combines the work of computer science, management science, and operations research with a practical
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orientation toward developing system solutions to real-world problems and managing information technology
resources. It is also concerned with behavioral issues surrounding the development, use, and impact of
information systems, which are typically discussed in the fields of sociology, economics, and psychology

In the sociotechnical view of systems, optimal organizational performance is achieved by jointly optimizing
both the social and technical systems used in production. Adopting a sociotechnical systems perspective
helps to avoid a purely technological approach to information systems.

Technology must be changed and designed, sometimes even "de-optimized," to fit organizational and individual
needs. Organizations and individuals must also be changed through training, learning, and planned
organizational change to allow technology to operate and prosper.
Information systems are sociotechnical systems. Although they are composed of machines, devices, and "hard"
physical technology, they require substantial social, organizational, and intellectual investments to make them
work properly. Since problems with information systems—and their solutions—are rarely all technical or
behavioral, a multidisciplinary approach is needed.
A Sociotechnical Perspective on Information Systems

In a sociotechnical perspective, the performance of a system is optimized when both the technology and the
organization mutually adjust to one another until a satisfactory fit is obtained.

System Approach or System Theory

The systems approach is a method or framework which helps us to analyze and explore the operation and
interactions which exist in the systems around us. In other words; this is an approach to problem
solving e.g. trying to structure an organization or analyze an information system. It
involves trying to establish the objectives of the system through considering the
relationship with its environment, identifying its component and the interaction features
of the system.

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Systems And Adaptability
To be successful and to remain in existence, organizations must be flexible and adapt to change. This means change not
only in the Organization's relationship with the external environment but also in its internal methods and structures.
Successful Organizations are characterized by their internal openness and their readiness to accept that yesterday's
methods and products are very unlikely to be suitable for tomorrow. Recognizing the need for change, initiating change
and managing change successfully are the hallmarks of good quality management. Organizations do not automatically
adjust to change.
Adaptation only occurs as a result of management decisions and action. Successful change is change that is planned and
considered. This means that the effects on the Organization as a whole must be considered when making a change to part
of the Organization. It will be recalled that a key element of the systems approach is that changes in parts of a system
affect the system as a whole. Thus, to make successful changes one must be aware of the interactions which exist in the
Organization.
Systems theory recognizes that open systems can achieve their objectives in a variety of ways using varying inputs,
processes and methods. This is known as equifinality.

Features of the systems approach;

a) Holism or synergy- All systems are composed of interrelated parts or sub-systems and the system can
only be explained as a whole (Holism or synergy). This is known as holism or synergy. Holism states
that any whole is more than the sum of its individual parts. When the appropriate parts are combined,
properties appear from the whole which the parts alone do not possess. These are known as emergent
properties. Examples of emergent properties are:
• Taste: a property of water not the constituent hydrogen and oxygen atoms.
▪ Growth: a property arising from the combination of seeds and soil.
▪ Obsolescence (Uselessness): likely to arise from consideration of financial, technical and
personnel factors. A machine may still work but may be too expensive or dangerous to run or may no
longer be required for current production.
b) Systems are hierarchical in that the parts of sub-systems are made up of other smaller parts. For
example, the accounting systems of an organization may be a sub-system of the information system
which is itself a sub-system of the planning system, which is a sub-system of the organization as a
whole. Progressing down the hierarchy increases the detail but reduces the area whilst moving upwards
provides a successively broader view.
c) The parts of a system cannot be altered without affecting other parts. Many organizational problems
stem from ignoring this principle. For example, a departmental procedure or form might be changed
without considering the ripple effects on the other departments affected, with dire consequences.

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d) The sub-systems should work towards the goal of their higher systems and not pursue their own
objectives independently. If sub-systems pursue their own objectives to the determent
of higher objectives (organization), this condition is known as sub-optimally i.e.
they aren’t performing optimally.
e) Organizational systems contain both hard and soft properties. Hard properties are those that can be
assessed in some objective way. Examples are; the number of components in a storage bin, the amount
of PAYE tax a person will pay. The soft aspects of a system are a matter of individual values or taste.
They cannot be assessed by any objective standard or measuring process. Examples are: the appearance
of a product, the suitability of a person for a job, any problem containing a political element and so on.
Entropy
Entropy is the term for the disorder or chaos in a system. Totally closed systems naturally deteriorate
and the total entropy in a system, without inputs, always increases.
Entropy can be countered by bringing in information and other stimuli from the system’s environment.
This helps the system to adapt and lower its entropy. Such a process is known as introducing negative
entropy.
Interconnections
Each sub-system has many inputs and outputs resulting in several interconnections
within the same system. Such interconnection of interfaces increases the cohesion
between them. It thus increases the complexity of making it difficult to manage, co-
ordinate and modify e..g
Changing the system that products customer details may affect other sub-system
in the sales ledger module.
A system with 4 sub-systems will have 6 possible interconnections in the formula
n (n-1) where n is the number of sub-systems.
2
General formula to give number of interconnections where n is the number of sub-
system is given by N (N-1)

Decoupling:
This is the tight connection between sub-components e.g. resources and facilities
need to be finely balanced, parts and documentation must be available and there
must be good flow of information. The solution is to decouple or looser or reduce the
intensity of interactions so that the sub-systems can operate with a degree of
independence.

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Decoupling can be done in the following three ways:-

(i) The use of inventories, buffers or waiting lives consisting of stock or work in
progress (W.I.P) e.g. in a computer system a printer has a buffer.
(ii) Have extra and flexible resources e.g. have extra personnel for several jobs
e.g. Benetton clothing inc. it provides undyed goods and other dyes then
before shipment.
(iii) Standardization – The existence of standard specifications an procedures to
ease communications e.g. when the receiving sub-system knows what to
expect. However decoupling has its own cost.

FORM OF DECOUPLING COST

1. Inventory (stock Resources e.g. materials, product and
control) warehouses are tied up in holding the
inventory.

Productive resources including people

2. Slack capacity (Extra and products etc are under employment
staff) or underutilized in order to provide the
slack.

There is always a higher cost of flexible

3. Flexible resources resources.

There is the poor use of resources in

4. Standardization certain cases in order to maintain
uniformity.

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Data and Knowledge Management

Management do not always know what information they need and information specialists often do not know
enough about management to be able to produce relevant information for the managers they serve.
There is no doubt that better communication between management and information specialists, plus a wider
knowledge by both groups of MIS principles would greatly facilitate the task of developing relevant and
appropriate information systems. There is, unfortunately, no simple checklist of essential features which, if
followed, will automatically produce the perfect MIS.
What is required is an awareness and understanding of key principles and function so that the design,
implementation and operation of the MIS is the result of informed decisions and judgments rather than
haphazard development without regard to real organizational requirements.

The nature of data, information knowledge and communications

The processing of data into information and communicating the resulting information to the user are the very
essence of an MIS. Data is the term for collections of facts and figures: hours worked, invoice values, part
numbers, usage rates, items received, etc. These basic facts are stored, analyzed, compared, calculated and
generally worked on to produce messages in the form required by the user i.e. the manager, which is then
termed information.
The full explanation of what is meant by information is dealt with in detail in the next chapter, but at this stage
information can be briefly defined as data that have been processed and communicated in such a way as to be
useful to the recipient.

Members of management use the information produced together with the information already within their
heads, called knowledge, to plan, control, and make decisions or to modify the produced information so as to
share the new knowledge with others in the organization. Knowledge management, which is the tools and tech-
niques for collecting, managing and disseminating knowledge within the organization, is of increasing
importance in today's high-technology business environment.

Data lifecycle process and the knowledge discovery

Business doesn’t run on data, but they do run on information and knowledge on how to
put that information to use successfully. Knowledge has always been an underlying
component of a business. This knowledge is continuously derived from data.

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The transformation of data into knowledge may be accomplished in several ways. It

starts with data collection from various (several) sources. These details are stored in a
database. This data can be pre-processed and stored into a data warehouse.

To discover knowledge the processed data may go through a transformation that makes
them ready for analysis.
The analysis is done with data mining tools which looks for patterns and supports data
interpretation. The result of this is generated knowledge. This knowledge is then
presented to the user and is thus stored in a knowledge base.

Collection Selection Pre-processing Transformation

Data source Data storage Target data Processed

Data Data mining Interpretation

Transformed Data Patterns Knowledge Knowledge base

Data and information defined

a) Data are facts, events, transactions and so on which have been recorded. They are the input raw
materials from which information is produced.
b) Information is data that have been processed and communicated in such a way that they can be
interpreted and understood by the recipient.

Data Characteristics
Data are facts obtained by reading, observation, counting, measuring, weighing, etc., which are then recorded.
Frequently they are called raw or basic data and are often records of the day-to-day transactions of the
organization.
Data are derived from both external and internal sources and whilst most external data are in readily usable and
concrete forms.
Data Quality (DQ)
This is the quality of data that will determine its usefulness as well as the decisions.
There are various problems associated with data quality and can be categorized into the
following:-
(i) Intrinsic data quality
- Accuracy
- Objectivity
- Believability

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- Reputation
(ii) Accessibility data quality
- Accessibility
- Security

(iii) Contextual data quality

- Value added
- Timelines
- Relevance
- Completeness
- Volume
(iv) Representation data quality
- Ease of understanding
- Concise representation
- Consistent representation

One of the major issues of DQ is data integrity. Older filing system may lack integrity i.e.
changes made in one file is one place may not be made in the file in another place or
department i.e. there is conflict of data.

Data Warehousing, Mining & Analysis

In today’s fast faced and highly competitive market, the access of data is critical. The
most successful companies are those that can respond quickly and flexibly to market
changes and opportunities and that the key to this response is the effective and efficient
use of data and information. For this an organization requires a system that is able to
support:-
a) End-users easy access the data.
b) Decision being made quickly.
c) Accurate and effective decision making.
d) Flexible decision making.

• The purpose of a data warehouse is to establish a data repository that makes data
accessible and really acceptable.
• The data is organized within the warehouse as a relational database so that it’s easy
for users to access.
• The data are organized by subject such as the vendor, product and functional area.
• Adamant is a replicate subset of a data warehouse and is dedicated to a functional
or regional area e.g. many companies have marketing adamant or adamant for
foreign operations.

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Characteristics of data warehousing

(i) Organization - Data are organized by detailed subject e.g. price level to support
relevant decisions.
(ii) Consistency - data has to be consistent in the relevant database.
(iii) Time variance – Data should be kept for a period of 5 to 10 years to allow
forecasting and comparison over time.
(iv) Non-volatile – Data shouldn’t change once entered in a warehouse.
(v) Relational – Data, should be stored in a relational structure to ease retrieval.
(vi) Client /server – the data warehouse uses the client /server architecture mainly to
provide the end-user an easy access to its data.

Advantages of data warehousing

1. Provides a frame-work for presenting the company with the unique opportunity to
restructure its I.T strategy.
2. It provides a consolidated view of the corporate data (company’s data) which is better
than providing many smaller views.
3. Allows information processing to be off-loaded from experience operational systems
onto low cost servers.

Data warehousing is suitable for organizations which have the following:-

(i) A large amount of data needed to be access by end-user.
(ii) The operational data stored in different systems.
(iii) An information based approach to management should be in use
(iv) There is a large and diverse customer base.
(v) The same data are represented differently in different systems.
(vi) The data are stored in highly technical formats that are difficult to decode
(decipher).
(vii) Extensive end-user computing is performed.

Strategic uses of data warehousing

a) Airline – they can be used for crew assignment, mixing of fares and route
profitability.
b) Investment and insurance – this are used in customer tendency analysis, market
movement analysis and risk management.
c) Retail –chain (supermarkets) – these are used for trend analysis, buying pattern
analysis and pricing policy.

Knowledge discovery in database (KDD)

The process of extracting useful knowledge from volumes of data is known as knowledge
discovery in databases (KDD).

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This is supported by the following technologies:-

1. Massive data collection
2. Powerful multiprocessing computers
3. Data mining algorithms (procedures).

Stages in the evolution of knowledge discovery

Evolution Business Enabling Characteristi
stage Question technology cs
1. Data What was my Computer disks Static data
collection total revenue in and tapes delivery
(1960) the last 5
years?
2. Data Access What were my Relational Database Dynamic data
(1980s) unit sales in TZ and SQL delivery at
in last March? (structured query record level.
language)
3. Data Could you drill- Active analytical Dynamic data
warehousing down to processing (OLAP) delivery at
(1990) Dares- multi-levels
Salaam?
4. Intelligent What is likely to Advanced Proactive
Data happen to sales algorithms and information
mining in Dares- massive databases delivery.
2000 and Salaam in the (Data marts).
over next month
and why?
Online analytical processing: (OLAP)
This refers to the searching of end-user activities such as the DSS modeling using
spreadsheet and graphics which are done online.
The objective of this is to look for conditions and patterns, trends and exceptional
characteristics.
1. Access very large amount of data e.g. several years of sales data.
2. Analyze the relationship between many types of business elements such as
sales, products, region and channels.
3. These involve aggregated (averaged) data such as sales volumes, budgeted
shillings or pounds and pounds speat.
4. Compare aggregated data over time periods e.g. monthly, quarterly and yearly.
5. Present data is different perspectives such as sales by region v/s sales by
product or by product within each region.
6. It involves complex calculations between data elements such as expected

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profits calculated as a function of the sales revenue for each type of sales
channels (mode of distribution).

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Data mining:
It derives its name from the similarities between searching for value business
information in a large database and mining on a mountain for mineral ores. This is the
going via immerse volumes of data to generate business opportunities.

Characteristics of data mining

1. Involves discovery of data buried deep within very large databases sometime
stored for several years.
2. The data is consolidated in a data warehouse, the internet and the intranet.
3. The environment has a client /serves architecture.
4. Data mining tools help remove the information one buried and corporate files.
5. The miner is often the end-user empowered by data drills and other power
query tools to ask adhoc questions and get answers quickly with little or no
programming skills.
6. Data mines can use several tools and techniques.
7. Data mining yields 5 types of information:-
(i) Association information
(ii) Sequences information
(iii) Classification information
(iv) Cluster information
(v) Forecasting information.

8. Because of the large amounts of data its sometimes necessary to use parallel
processing for data mining.
Data visualization refers to the representation of data by technologies such as
digital images; graphical user interfaces or animations visualization software
packages often use capabilities for self-guided exploration and visual analysis of
large amounts of data.

Data mining can also be applied in:-

1. Identifying individuals or organization most likely to respond to direct mailing.
2. Determining which products or services are commonly purchases together
(complementary products) e.g. bread and blue band.
3. Predicting which customers are likely to switch to competitors.
4. Identifying which transactions are likely to be fraudulent.
5. Identify common characteristics of customer who purchase the same products.

INFORMATION AND MANAGEMENT

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What is information?
Information is data that have been interpreted and understood by the recipient of the message. It will be noted
that the user not just the sender is involved in the transformation of data into information. There is a process of
thought and understanding involved and it follows that a given message can have different meanings to different
people. It also follows that data which have been analyzed, summarized or processed in some other fashion to
produce a message or report which is conventionally deemed to be ‘management information’ only because
information is understood by the recipient.

In summary, information is knowledge and understanding that is usable by the recipient. It reduces uncertainty
and has surprise value. It must tell the recipient something not already known and which could not be predicted.
If a message or report does not have these attributes, as far as the recipient is concerned, it contains merely data
not information. This is a crucial point not always fully appreciated by information specialists.

Ideally, managers should be able to define the type of information they require and the MIS should be able to
supply it. In practice, of course, it does not happen like this and managers have to use whatever information is
available, from whatever source. As Drucker said:
"The manager will never be able to get all the facts he should have. Most decisions have to be based on
incomplete knowledge - either because the information is not available or it would cost too much in time
and money to get it. There is nothing more treacherous or alas, more common, than the attempt to make
precise decisions on the basis of coarse and incomplete information.
(Drucker, Management: Tasks, Responsibilities, Practices, 1993)
In spite of the difficulties of producing it, managers need relevant and timely information to assist them to plan,
to control and to make decisions. Relevant information is information which:
A. increases knowledge
B. reduces uncertainty
C. is usable for the intended purpose.
A worthwhile extension to the well-known adage that 'management get things done through people' would be
that, 'management get things done through people, by using relevant and timely information'.
Although all managers need information they do not all need the same type of information. The type of
information required is dependent on many factors including: the level of management, the task in hand,
confidentiality, urgency, etc.

Information classifications

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Information has many characteristics and can be classified in numerous ways
including: by source: e.g. internal, external, primary, secondary, Government
by nature: e.g. quantitative, qualitative, formal, informal
by level: e.g. strategic, tactical, operational
by time: e.g. historical, present, future
by frequency: e.g. continuous (real time), hourly, daily, monthly, annually
by use: e.g. planning, control, decision making
by form: e.g. written, aural, visual, sensory
by occurrence: e.g. at planned intervals, occasional, on demand
by type: e.g. detailed, summarized, aggregated, abstracted.

ORGANIZATION’S STRUCTURE, CUTLURE AND CHANGE

These are 4 basic forms of organization structure:-
1. Hierarchy of Authority
This is illustrated as a pyramid. In this structure each position has authority
commonly associated with it and a span of control. (These are the number of sub-
ordinates working under a particular authority). This may be narrow or wide
giving raise to Tall and Flat structure.

TALL FLAT
2. Specialization: This is the division of labor in an organization. Its usually based on
the different functions such as marketing, accounting, production and distribution.

GENERAL MANAGER

Sales & marketing Production Distribution Accounts

manager Manager Manager Manager

3. Formulation: Extent to which rules and procedures exist to handle organizational

activities. An indication of formalization is the extent to which decisions can be
programmed.

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4. Centralization: This refers to the organizational structure where decision making

occurs either at the top level or low level.

Organization culture can be perceived as:-

1. Either using High technology or low technology.

2. Either a price leader or a price follower.
3. Produce high quality or low quality goods.
4. They are industry innovators or imitators.
5. Either selective marketer or mass marketers.
6. Risk takers or risk evaders.

Managers seek to change the culture of the organization. What they try to do is shape
the way people behave, feel, contribute, interact and perform as employees of the
organization. This is usually called leadership. They initiate debates and set priorities.

New polices, methods and roles are introduced to shape behaviors, encourage, promote
and require – to push certain expectations of performance in the business and thus to
control.
In other words culture is organizational terms is broadly the social and behavioral
manifestation and experiencing of whole range of issues such as:-
1) The way work is organized and experienced.
2) How authority is exercised and distributed.
3) How people are and feel rewarded organized and controlled.
4) The values and work orientation of the staff.
5) The degree of formalization, standardization and control through systems.
6) The value placed on planning, analysis, logic and fairness etc
7) How much initiative, risk taking, scope of individuality and expression is given.
8) Rules and expectations about such things as informality in interpersonal relations,
dressing etc.
9) Emphasis given to rules, procedures, specifications of performance and results,
team or individual working.

We are born in a culture; we take up employment in a culture. We might therefore argue

that the culture of an organization affects the type of people employed, their career
aspirations, their education backgrounds and their status in society.
Organizational power is the ability to obtain and utilize human and material resources to
accomplish objectives. Organizational change is the natural growth and decline in the
process within the organization which may be caused by unstable goals and project
changes etc.

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The following factors have led to changes in the business environmental as a result of
information systems solution:

1. The emergency of global economy (Globalization):-

This involves management and control in a global market place, competition is the
world market global work groups and global delivery systems. Today, information
systems provide the communication and analytical power that firms need for
conducting trade and managing businesses on a global sale.
Controlling involves communicating with distributions and suppliers operating 24
hours a day in different national environment, servicing local and international
reporting needs, therefore business needs powerful information systems in
response.
Globalization and I.T also threatens the domestic business firm as customers can
shop in a worldwide market. This increased competitor and forces firms to play in an
open and unprotected worldwide market.

2. Transformation of industrial economies (industrialization).

Major industrial powers are being transformed from industrial economies to
knowledge and information based economies while manufacturing has been mainly
to how wage countries (cheap labor).
Knowledge and information intense products require a greater deal of leaving and
knowledge to produce. This has led to enhanced productivity, new products and
services, shorter product life cycles and a turbulent environment. And as such
across all industries information and technology that delivers it has become critical.
Information systems are needed to optimize the flow of information and knowledge
within the organization to help management maximize the firm’s knowledge
resources. And because of the productivity of the employees, this would be
dependent on the quality of the system servicing them and it’s critical to the
survivor of the firm.

3. Transformation of the business enterprise

There has been a transformation in the organization and management of funds. The
traditional business firm is hierarchical, centralized and structured with an
arrangement of specialist flat typically rely on a fixed set of standards and a set of
operating procedures (SOPs).
The new style of a business firm is flattered, decentralized, flexible arrangement of
generalists who rely on instant information to deliver mass produced products and
services uniquely suited to specific markets and customers. The traditional
management group relies on formal plans, a rigid division of labor, formal rules and

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appeals to loyalties to ensure the proper operation of the firm. For this to be
possible an organization requires powerful information systems.

The Networked Enterprise

Computing power is during organizations into networked enterprises, allowing
information to be instantly distributed within and outside the organization.
New ways of conducting business electronically have emerged
1) Flattering organization – this has led to organizations to have fewer levels of
management with low level employees being given greater decision making
authority. Networked computers have made it possible for employees to work
together so a team.

2) Separating work form location – Communication technology has eliminated

distance as a factor for many types of work in many situations. Sales personnel
can spend more time in the field with the customer and still have up-to-date
information while carrying much less paper work.
Networked information says are allowing companies to co-ordinate geographically
located branches and more so coordinate other organizations as virtual
organizations. These are organizational using networks and linking people, assets
and ideas to create and distribute products and services without being limited by
traditional boundaries or physical locations.

3) Organization of workflows – Information systems have progressively replaced

manual work procedures with automated procedure and work flows. This has
reduced the cost of operations in many companies. This has also led to an
increase in the flexibility of the organization.
Companies can use communication technology to organize and increase the ability
to respond to changes in the market place and take opportunities when they arise.

4) The Changing Management Process:

Information systems are providing powerful capabilities to help in the process of
management. Managers can obtain information on their organizations performance
down to the level of specific transactions just about anywhere in the organization
at any time.
These organizations use enterprise resource planning system (ERPS) which is
able to integrate the different facets within the company such as
manufacturing, planning, and sales and finance so that they can become more
coordinated by sharing information with each other.

Examples of ERP systems available include;-

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- Macula - SAP - Scala - JBA - Oracle

- Mavisino - Baan - Sun system - JD Edwards

5) Redefining Business Boundaries

Networked information systems can enable transactions such as payments and
purchase orders to be exchanged electronically among different companies
thereby reducing the cost of obtaining products and services outside the firm.

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Chapter 2

USE OF INFORMATION SYSTEMS IN MANAGEMENT

Information system
Information system has been defined in terms of two perspectives: one relating to its function; the other relating
to its structure. From a functional perspective; an information system is a technologically implemented medium
for the purpose of recording, storing, and disseminating linguistic expressions as well as for the supporting of
inference making.
From a structural perspective; an information system consists of a collection of people, processes, data, models,
technology and partly formalized language, forming a cohesive structure which serves some organizational
purpose or function. The functional definition has its merits in focusing on what actual users - from a
conceptual point of view- do with the information system while using it. They communicate with experts to
solve a particular problem. The structural definition makes clear that IS are socio-technical systems, i.e.,
systems consisting of humans, behavior rules, and conceptual and technical artifacts.

An information system can be defined technically as a set of interrelated components that collect (or retrieve),
process, store, and distribute information to support decision making and control in an organization. In addition
to supporting decision making, coordination, and control, information systems may also help managers and
workers analyze problems, visualize complex subjects, and create new products.

Three activities in an information system produce the information that organizations need to make decisions,
control operations, analyze problems, and create new products or services. These activities are inputting,
processing and outputting. Input captures or collects raw data from within the organization or from its external
environment. Processing converts this raw input into a more meaningful form. Output transfers the processed
information to the people who will use it or to the activities for which it will be used. Information systems also
require feedback, which is output that is returned to appropriate members of the organization to help them
evaluate or correct the input stage.

Components of an Information System:

The components that make up an IS are:-

1. Hardware – This is a set of devices such as the processors, printers and monitor.
Also includes mainframes and minicomputers that can accept data and process
them respectively.
2. Software –A set of instructions or program that enable the hardware to process data.
These can be classified into system software and application software.
3. Databases – This is a collection of related files or tables that store data and their
association or relations among them.
4. Network – This is a connecting system that allows the sharing of the resources by
different computers.

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5. Procedures – This is a set of instructions about how to combine the above
components in order to process information and generate the desired output.
6. People – These are the individuals who work with the system or use its output

Importance of Information system in management

The main purpose of Information System is to provide the management the necessary information for decision
making. In order to achieve this purpose MIS is to perform the following functions.
Collection of data: The first function of MIS is to collect necessary data from both internal and external sources
of the organization. The data of the organization which have already been gathered are kept in some physical
medium such as a paper form or entering it directly into computer system.
(i) Processing data: After storing the data, the next important function of MIS is to process the same. In the
processing, the data are converted to require management information, calculating company, sorting,
classifying and summarizing etc. are the necessary activities to be done for processing the data.
(ii) Storage of information: Under the MIS, necessary data and information are carefully stored, so that it can
save time for searching the same. Generally, data and information are stored by reserving and organizing
them in the form of files, records and databases for future use.
(iii) Retrieval of information: Another function of MIS is to retrieve the information to meet the exact
management information demands. So retrieval should be done as per the requirement of the
management users.
(iv) Disseminating: Disseminating is the last function or finished product of MIS. By disseminating the data
and information are divided and distributed to the users in an organization. This can be done through
reports or outline through computer terminals periodically.
An Organization as a System

ENVIRONMENT Standard
• Customers Polices & decision
• Suppliers making
• Competitors Management
• Govt. Policies
Control

Raw materials Transformation Service or Goods

energy
Human labor

INPUT PROCESSING OUTPUT

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CONTROL PRINCIPLES
Control is the process of ensuring that operations proceed according to plan and at the most basic level-this is
done by comparing the actual results or output of the system against a target and using any differences found to
adjust the input side of the system so as to bring activities in line with the target. In practice the target may be
termed a norm, a budget a standard, a performance or stock level and so on.
Types of Control Systems
There are basically two types of control system: the open loop system and the closed loop control systems.

(i) Open loop control system

This is a simple open loop control system. Its operation is very simple, when an input signal directs the control
element to respond, an output will be produced. Examples of the open loop control systems include washing
machines, light switches, gas ovens, etc.

The drawback of an open loop control system is that it is incapable of making automatic adjustments. Even
when the magnitude of the output is too big or too small, the system will not make the appropriate adjustments.
For this reason, an open loop control system is not suitable for use as a complex control system. Sometimes it
may even require monitoring and response from the user.

(ii) Closed loop control system

Sometimes, we may use the output of the control system to adjust the input signal. This is called feedback.
Feedback is a special feature of a closed loop control system. A closed loop control system compares the output
with the expected result or command status, and then it takes appropriate control actions to adjust the input
signal. Therefore, a closed loop system is always equipped with a sensor, which is used to monitor the output
and compare it with the expected result.
The diagram shows a simple closed loop system. The output signal is fed back to the input to produce a new
output. A well-design system can often increase the accuracy of the output.

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Feedback

This is the gathering of information on past performance from the output of a system,
department or process and using it to govern future performance by adjusting the input
size of the system.

Feedback can be divided into positive feedback and negative feedback.

(i) Positive Feedback
This causes a system to amplify an adjustment or an action. It acts in the same direction
as the measured deviation i.e. this reinforces the way the system is moving and if
thought to be beneficial.
If an advertisement increased the sales further advertisements may be considered.

(ii) Negative Feedback

This is feedback seeking fluctuation around a norm or a standard. The corrective action
is on the opposite side of the deviation e.g. production quantities below the plan may
require an increase in labor.

One advantage of using the closed loop control system is that it is able to adjust its
output automatically by feeding the output signal back to the input.
In a closed loop control system, the controlled variable (output) of the system is sensed
at every instant of time, feedback and compared with the desired input resulting in an
error signal. This error signal directs the control elements in the system to do the
necessary corrective action such that the output of the system is obtained as desired.
The feedback control system takes into account the disturbances also and makes the
corrective action.
These control systems are accurate, stable and less affected by noise. But these control
systems are sophisticated and hence costly. They are also complicated to design for
stability, give oscillatory response and feedback brings down the overall gain of the
control system

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Feedback Loops

High level controller

Low-level
Controller
Standard

Effector Comparator

System Being Sensor management

Adjust Controller
System inputs System output
e.g. labor
finances

1. SENSOR- This is the measuring and recording device for example automatic metering or some kind of
paper work.
2. COMPARATOR – This is he means by which comparisons of actual results and the plan are achieved
e.g. A clerk or a computer program.
3. EFFECTOR – This could be a manager or supervisor acting on the report to make adjustments.

The procedure outlined above, i.e. input - process - output - monitor and compare - adjustment, requires what is
known as a feedback control loop and such a loop is a common feature of many aspects of MIS, for example,
stock control, budgetary control, production control and so on. It will be realized that the basic system described
is relatively mechanistic and is therefore not necessarily suitable for all facets of the organization’s activities.

Feed Forward

Where a self-regulating feedback system is not able to control a process adequately it may be feasible to use
feed forward. This is where monitoring at some early stage of a system or process may indicate that an
adjustment should be made at a later stage of the process, prior to the final output. Feed forward is not an
automatic process and requires management intervention for it to operate successfully and, consequently, it does
not have the degree of 'automatic' control inherent in a feedback system.

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Timing of Control
Control is most effective when the time rank between the output and the corrective
action is minimal. The speed of control is influenced by organization structure and the
reporting period. Managers may be unable to effect control due to the following
reasons:-
1. The subject covered is outside manager’s control.
2. The information comes too late for effective action to be taken.
3. Insufficient details are provided.
4. The information that is provided is in a form that isn’t understood.

PLANNING

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Information Systems and Organizational Structure

An Information System is a composition of people, procedures and equipment that
provide information to the management to be able to make appropriate decisions. This
can now be illustrated in the following pyramid.

Strategic Le-vel Support long-rays planning activities of semi level

EIS or management from both environment and internally.
ESS - Maintain changes in external environment with existing
information and activities
- Support maintaining and decision making and
administrative activities of middle level management
Tactical level (DSS,
MIS)
- Support knowledge and data worker in organization
- Help business to integrate new knowledge and
Knowledge level (KSWS,
control the flow of paper work in the organization.
OAS)

- Monitor elementary activities and

Operational level (TPS) transaction of the organization.
- Answer routine questions and track flow of
information in organization
- Must be current and accurate.

1. Operational System
They monitor elementary activities and transactions of the organization e.g. sales,
receipts, cash deposits, payroll and flow of materials in the factory.
The main purpose of these systems is to answer routine questions and track the flow
of information in the organization. To answer this information must be available, it
should be current and accurate e.g. a bank deposit query from a bank A.T.M.

2. Knowledge Level Systems

This supports knowledge and data workers in the organization. It may help businesses
to integrate new knowledge and to control the flow of paper work in the organization.

3. Management /Tactical Level Systems

They support the monitoring, controlling and decision making and administrative
activities of middle level managers e.g. they may be required to compare the current
data with the past. These systems produce reports rather than instant information on

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the operations. They may focus on the less structures decisions for which information
requirements aren’t always clear and attempt to answer the ‘what if’ questions.
4. Strategic Level Systems
These support the long-range planning activities of the senior level management both
from the environment and internally. Their main concern is maintaining changes in
the external environment with the existing information and activities.

Level of Typical Planning Decision type Accuracy Source of

management responsibility Horizon information
1. Strategic Setting Organization Normacy takes Non-structured Very low Mostly from
goals, long-term period of 5-10 & subject to Accuracy outside the
plans and policies years depending many changes organization and
on the project internal
2. Tactical Setting and Usually takes 1 to Semi-structured Reasonable A mixture of
monitoring org. 3 years and based on the accuracy e.g. internal and
budgets, meeting the managerial when setting external sources
strategic goals & experience budgets and e.g. what is
developing targets happening to the
operations objectives competitors.
and policies
3. Operational Effective use of Usually a week or Structures and High accuracy Captured from
existing facilities and less day to day hardly require required e.g. source
resources. human tracking the documents.
Concerned with day- intervention. cost to a cent
to-day running of the
organization

Types of Information Systems

Strategic level (long-term planning)

ESS

Tactical level (planning & control)

MIS & DSS

Knowledge level (designing new

KWS & OAS products)

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TPS track of daily activities)

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TRANSACTIONS PROCESSING SYSTEMS (TPS)

These are the basic business systems serving the operational level of the organization. A
TPS is a computerized system that performs and records the daily routine transactions
necessary to conduct the business e.g. sales order entry, invoicing, hotel bookings,
payroll and shipping data. At this level tasks, resource and goals are predefined and are
highly structured e.g. the products that are out of stock and the slow moving stock.

TPS are central to an organization such that if there is a failure it can bring the
organization to a standard still. The information inputs for the TPS are in the form of
transactions and events. Processing involves sorting, listing, merging and updating.
The information output are detailed reports which are given to the operational staffs and
supervisors.
It provides the input data for many other systems. T.P.S is critical to the success of any
organization since they support the law level operations such as purchasing o raw
materials. Billing customers and preparing the payroll etc.
The objectives of T.P.S are:
1. To provide all information needed by law or by the organization policy to keep the
business running properly and efficiency.
2. Provide timely documents and reports.
3. Increase the competitiveness of the organization.
4. Provide necessary data for tactical and strategic systems e.g. the DSS.
5. To assure accuracy and integration of data and information.
6. To safeguard assets and security of information.

NB: T.P.S is the most likely candidates for re-engineering and usually yield the most
tangible benefits of I.T. investments.

Major characteristics of T.P.S

1. This involves large amounts of data to be processed. Sources of this data are
mostly internal.
2. T.P.S process information regularly e.g. Daily or Weekly.
3. Due to the voluminous information that is processed a higher storage capacity is
required.
4. Due to these high volumes, high processing speeds are needed.
5. T.P.S systems monitor and collect current and past data.
6. The inputs and the outputs are highly structured (programmable).
7. A high level of details is usually observed in the input.

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8. This system requires a high level of accuracy, data integrity and security.

Activities and methods of TPS

There are 2 transactions processing modes namely;
1. Batch processing
Business transactions are corrected as they occur and are accumulated over a
period of time and prepared for input as a single unit or batch. This is normally
processed periodically e.g. monthly, examples include the payroll and the general
ledger.

2. Interactive /Real-Time processing

The transactions data are processes immediately without delay e.g. inventory
systems, ticketing systems, reservation systems and A.T.Ms.
T.P.S can also be based on a client /server and internet technologies.
Innovations such as online transactions processing (OLTP) can serve many people by
allowing suppliers to enter the TPS and look at the inventory level.

Types of TPS (FUNCTIONAL TPS)

1. Order processing
This is necessary to ensure that the customer orders are filled in a timely manner
and that sufficient finished goods are always available.
Sales people in many organizations will enter order from client sites using portable
wireless computers.

2. Inventory /Stock Control

A manufacturing firm will have several inventories such as raw materials, work in
progress (W.I.P) and finished goods. These could also contain maintenance parts.
The inventory T.P.S monitors stock going out or coming in to the organization via its
various warehouses and plants.

3. Accounts Receivable /sales ledger or Debtor ledger

This manages the cash flow of the company by keeping track of the money owned
on changes for the goods sold. The system updates records and raises an invoice
/statement regularly.

4. Account payable /purchase ledger or creditor ledger

Keeps track of money owed to company by various creditors or suppliers.

5. Payroll

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This monitors the salaries and has the primary output as checks and pay slips to be
distributed to the employees and provides a payroll register which is a summary of
all the transactions.
6. Human Resources
This system gives the information about the employees for personnel planning
and government reporting and also the management of the company to benefit
from other programmes. These include information on the employee’s e.g. net
pay, deductions e.t.c.

7. General ledger
This is a record of the monetary transactions e.g. payment to suppliers, receipts
from customers and payments to employees. It will give financial statements such
as the trading and profit and loss account, the trial balance and the balance sheet.

Knowledge Work and Office Automation System (KWS & OAS)

KWS are the systems that secure the knowledge workers. They do assist the
knowledge workers in the creation and integration of new knowledge in the
organization. The knowledge workers are the people who have the responsibility of
creating or finding new sources of information. This includes engineer doctors,
scientist and programmers. Processing involves modeling and simulations. The
information outputs are models and graphics for professional and technical staff.
Office Automation system are computer system this include word processors, emails
and scheduling system, designed to increase the productivity of the data workers in
the office.
Data workers have less formal qualifications and tend to process information a lot is
already available. This includes secretariat, accounts, filling clerks or managers whose
jobs include the use, manipulation or dissemination of information.
Information inputs are documents and schedule – processing includes, delegation
scheduling and communication. The outputs are clerical schedules and the mails for
clerical workers.

Management Information System (MIS).

They are information system at the management level that assists in the planning,
controlling and decision making. They are oriented towards internal rather than external
events. To a high degree they depend on the information from the T.P.S. They
summarize and report on the basic operations of the company.
They are used for comparing performance i.e. they give an analysis of the past and
present.
Information inputs are summary transaction data high volume data and simple models.

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The processing includes routine reporting, simple modeling and low level analysis. The
outputs are summary and exceptional reports for middle managers.
Adhoc reports are reports that aren’t available immediately but can easily be generated
by specifying certain parameters at any given time.
Exceptional reports are the reports that give a deviation in controls within a certain
system e.g. payroll where employee’s way is listed those that have negative salary.

MANAGEMENT REPORTING SYSTEMS (M.R.S)

A M.R.S is a computer system capable of integrating data from many sources to provide
data and information. They are useful in supporting operations, management and
decision making in organization. MRS extracts data processes and product meaningful
results. The main aim of an MRS is to identify potential problems on areas of opportunity
for improvement.

Characteristics of MRS system

1. It’s oriented towards reporting on the past and the present rather than projecting
the future hence the need for warehouses.
2. This is usually designed by MIS professionals rather than end users over extensive
time periods.
3. This is built for situations in which information requirements are reasonably well
known and are expected to remain stable.
4. Have limited analytical capabilities.
5. Generally report on internal company operations.
6. Present information in standard formats.
7. Provide feedback path in target /budget vs. actual enabling management control.

1. A detailed report.
Such a report is frequently used to verify that the transactions have been entered and processes
corrected. Such a report is however long and not good for reporting trends or problems
(progress).
Order Custom Sales Shipme Qty Item Amoun
no. er code person nt date t
2. Summary Report
Brings together one or more related transactions and shows the total results.
Whereas the detailed report would give all the sales made in the company within a
specified time period, the summary report will indicate the sales amount for all the
personnel in the sales department within the specified period.

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3. Exceptional Reports
These reports display data only about exceptional conditions. It records abnormal
cases e.g. customers who have exceeded their credit limit but are receiving their
goods or products and that their current credit limit is negative according to the
system.

Management reports can be produced on 3 occasions i.e.

i) Either periodic /schedule
They are prepared on a regulator basis i.e. weekly or quarterly.
ii) Exceptional
They are produced whenever certain conditions are met or not met e.g.
products below the re-order level.
iii) On demand or adhoc
They are prepared whenever they are required by the end user.

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No. Types of Timing or Exception On demand

report trigger
1. Detailed Daily input list Individual Sales by
of sales sales over sales person
10,000 by product
2. Summary Daily total sales Sales Total sales
and Daily people by sales
monthly sales exceeding person and
5,000 total sales
by customer
3. Exceptional Daily error limit

ESS

MIS DSS

KWS
or DAS TPS

Controls of Transaction Processes

The audit trail tracks document numbers, transaction references and the respective
dates and times. This is to ensure the accuracy integrity and security needed by the
T.P.S needed.
Most fraudulent transactions are performed at the transactional, operational level.
Several controls of the T.P.S include;
1. Source document control.
a) We use pre-numbered documents to enable proper accounting.
b) We make use of batch and harsh totals.
c) We record all documents produced by the by-products of the transaction.

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2. Information processing control.

This is designed to ensure that information services conform to the organizations
objectives and policies and that information produced is complete and correct e.g.
verification and validation.

3. Information systems management and control.

These are responsible for the development and operations of all information
systems.
a) This is to make sure that the maintenance of systems is undertaken by qualified
staff through selection, training and evaluation.
b) This ensures that appropriate hardware and software are purchased.
c) This is to have the scheduling of work of the development staff so as to monitor
progress.
d) To ensure control over the database design, authorization and access.
e) To establish and enforce the guidelines and standards so as to meet end-user
objectives.

Decision Support Systems

Information systems for the management level that combine data and sophisticated
analytical models on data analysis tools to support semi-structured decision making.
• They are used where decision are unique or rapidly changing and aren’t easily
specified in advance.
• They use internal information from TPS and MIS and also bring information from
external services
• These systems have more analytical power than any other system and have an
interface that is interactive and user friendly.
• The information inputs are low volume data or massive databases which have
been optimized for data analysis and analytical modeling.
• Processing involves interactive simulations and analysis and the outputs are
special reports, decision analysis and responses to queries
Characteristics of decision support system
1. They are developed with the participation of individual managers or a group of
managers to support a range of decisions. Some decision support system are
simple and may be developed with a spreadsheet package e.g. Ms Excel or Lotus
123.
2. DSS are built to be modified so as to adapt to the user requirements.
3. DSS directly support the decision making process.
4. They have the strengths of projecting possible future situations during the
planning process using the “WHAT IF” mode e.g. what if we increase the
advertising expenditure by 5% and the “GOAL SEEKING” mode e.g. what would it
take in terms of input factors to achieve a particular performance?

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5. It has extensive analytical capabilities using logical and mathematical
manipulation of data.
6. It combines one internal and the external information so as to build its own
databases.
7. It has a graphic facility to portray the decision situation rather than the tabular
display or data.

COMPONENTS OF A D.S.S

Data management systems Model management system

Creator, maintenance
and use of models

Retrieval Extraction
of data from Internal
and External sources Dialogue management Menus, icons, natural
language and graphics

system

Human Decision Maker

User

Data Management System (SUB-SYSTEM)

It relies on a variety of internal and external databases. The extraction procedures
are specified by a specialist rather than an end-user paying attention to data
consistency across multiple support systems.

Model Management System

A model is an abstract representation that illustrates the components or relationships of
a given situation. Models can be physical e.g. an airplane model. It can be mathematical
e.g. an equation or it can be verbal e.g. the description of a procedure for writing an
order. It may also be statistical e.g. the mean, median, mode, the variance and the
standard deviation or they can be optimization models, forecasting or sensitivity analysis
model asking the WHAT IF questions to determine the impact of changes in one or more
factors or outcomes.
The power of a D.S.S. relies on the user’s ability to apply quantitative and mathematical
models to data or even statistical. These may include:-
i) Market responses models – this show how sales depends on factors such as price
and promotion.

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ii) Simulation models – this generates input values randomly from probability
distribution e.g. to determine the number of operators or cashiers needed.
iii) Optimization models – these are developed by management scientists for the
allocation of resources to maximize profits or minimize costs and time. They are
usually based on linear programming.
Dialogue Management System (SUB-SYSTEM)
Since the D.S.S has the ability to apply models to large volumes of data from a variety
of sources, the advantage of a D.S.S is that the user finally and has a flexible
interface between the human decision maker and the computer system. These sub-
systems support multiple forms of input and output. A.I has improved on this by adding
the ability to specify what is required in a subset of national language on activate the
system by voice. The windows capability enables the user to maintain several activities at
the same time. Extensive computer graphics are also utilized and the kind of dialogue will
take the following form:-
a) Who is the biggest?
b) How do circumstances change over a given time?
c) How will one fact predict another?
d) What is typical or exceptional?

Classifications of DSS
They can be classified by the manager’s level i.e. operational tactical or functional area
e.g. marketing, finance and personal among others.
1. Data Access System
They provide a user friendly interface and adhoc access to the database. This is
similar to what is offered by database management through a quarry language.
These systems are meant for operational control.
2. Data Analysis System
They help to analyze historical and current data either on demand or periodically e.g.
comparing the performance with that of the competitors.
3. Forecast-oriented Data Analysis systems
They assist in developing product plans including market segment forecast, sales
forecast and analysis of competitive actions. Their operation is based on access to a
variety of internal and external sources, marketing and product databases including a
series of historical data.
4. Systems based on Accounting Models

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They consider alternative options for planning purposes based on accounting

deviations and relationships. They produce estimated income statement and balance
sheet and they use the “what if” mode of alternatives.

5. Systems based on representation models

They show the dependence between a controllable variable e.g. the price of a
produce and an outcome such as sales. And they use simulation models to yield
probabilistic results.

6. Systems based on optimization models.

They are used by management scientists to determine optimal allocation of
resources or the best possible schedule e.g. the use of linear programming to
maximize an objective such as profit.
7. Systems with suggestion models.
These actually suggest decision rather than evaluating alternatives. They are used in
narrow domains of knowledge and are based on the expert system technology e.g.
suggesting a product price or a production volume.
They have the same capabilities and limitations like expert systems. Data oriented
decision support systems support easier places of decision making i.e. the
intelligence, the decision and the choice places are supported by model oriented DSS.

When to use decision support systems

1. When there is vast amount of data to be processed.
2. When there is a large amount of computation or data manipulation that have
complex interrelationships.
3. When there is an analysis of stages requiring the “WHAT IF” approach.
4. When human judgment is required.
5. When communication is required and several people contributing some special
expertise are involved.
6. When the decision maker is comfortable with the use of quantitative methods to
enhance decision making.
The Building of the DSS
D.S.S acquisition depends on the technology applied and the nature of the decision task
that need support. D.S.S technologies include;-
1. Specific D.S.S – This is the actual system that a manager works with during the
decision process. It’s built using D.S.S generators or tools.
2. D.S.S Generators – This is a software package that provides capabilities for
building a specific D.S.S rapidly and easily. The common characteristics are that
much of the processing and data accessing functionality is already programmed
into to generator. Examples of generators are express, PC Express, Focus, Nomad
2 Lotus 1, 2, 3 and Ms Excel.

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3. D.S.S. Tools – This programming language with good capabilities for accessing
arrays of data e.g. APL, a plain spreadsheet, a statistical package SPSS or SAS or
a DBMS with a Query facility which can be used as a building block to contract
a
D.S.S generator or A specific D.S.S.

“Who builds a D.S.S?”

This is done by the end users and the MIS professionals. It involves the following groups
of people:-
1. The manager is the end-user and the MIS professionals. It involves the following
groups of people.
i) The manager is the end-user of a specific DSS on a knowledge worker who
actually employs the system to make decisions.
ii) The intermediary who assist the manager to learn the system.
iii) A DSS builder who employs a generator to build a specific DSS for the given
end-user. He must be familiar with the business problems and the
capabilities of the generator.
iv) The technical support specialists who install and maintains various modules
of the generator package as needed. He ensures that there are linkages to
other element such as databases, personal workstation and the network.
v) A tool smith who develops the building blocks employed by the generator.

Comparison of DSS and MIS

DSS MIS
1. A DSS is more targeted. An MIS is more widely spread
2. They focus on specific They use routine flows of data to assist
decisions in the general control.
3. They are aimed at all They are largely dominated by
managers professional e.g. accountants and HR
experts.
4. They are continuously They follow a particular system
interactive development methodology.

Methods of DSS Development

1. Quick-hit approach
Most DSS are built for personal use of a decision maker using a DSS system such as
spreadsheet package with templates. This method faces the same risks as those of
end-user computing e.g. lack of maintainability.
2. Traditional life cycle development.

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This involves detailed system planning, analysis, design, coding, testing and
implementing. This method is good for complex D.S.S. and D.S.S generator.
3. Iterative development (prototyping).
In DSS development users may not know what they what from the system. A
prototype, which is a simple initial version, is used to experiment with and learn about
the desired features of the system. This method of development relies on the creation
of such a prototype and its progressive refinement. The simple version consist of 3
elements i.e. the Database. The dialogue and the model sub systems.

Develop a Prototype

Prototype /DSS Evaluation

Are current Yes Validation and

requirements met?
Development

documentation of
DSS

No DSS is ready
for use
Prototype /DSS modification

Geographical Information System (G.I.S)

This is a special category of D.S.S that can handle and analyze data for planning and
decision making using digitized maps. The software can assemble, store, manipulate,
and display geographically referenced information, time data to points, lines and areas
of a map.
They support decisions that require knowledge about the geographical distribution of
people or other resources which are useful in planning e.g.
1. Where to locate ATM in towns and cities.
2. Where to locate petrol stations.
3. To know market and know where to emphasis in marketing.
4. Depots and distributions points.

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Web-Based Decisions Support System

These are systems that support decision making by providing online access to various
databases and information pools for the purposes of software analysis “handouts later”

GROUP DSS (GDSS)

It’s an interactive computer based system to facilitate the solutions of unstructured
problems by a set of decision makers, working together as a group. It includes web
based tools for radio conferencing and E-meetings.
They help to share information, exchange ideas and export alternative solutions with the
use of models and data, voting and consensus.
The settings for a DSS range from a face to face meeting or an executive planning group
who are widely dispensed e.g. Insurance company agents discussing the possibility of
new rates.
A typical GDSS should include the following:-
1. HARDWARE:- Conferences facility with a room, facilitates and electronic hardware
such as electronic display boards, audiovisual equipment, computer and networking
equipment.
2. PEOPLE – Needs participants, a trained facilitator and the staff that support the
hardware and software.
3. SOFTWARE TOOLS – such as;
a) Electronic questionnaires – assist the organizers in planning and identifying
areas of concern from the participants.
b) Electronic brain-storming tools – they allow individuals to simultaneously and
anonymously contribute ideas and eventually choose the most appropriate.
c) Idea organizer – facilitate the organized integration and synthesis of ideas
generated during brain-storming.
d) Tools for voting or setting priorities – help in simple voting and ranking the
decision.
e) Group Dictionaries – document group agreement in the definition of words and
terms used in a project.
Characteristics of GDSS
1. They have the 3 major components i.e. databases, models and dialogue sub-
system and communication component or a local area network or WAN.
2. It has a complete decision room equipped for group effort e.g. a large common
screen display.
3. The participating members of the group remain anonymous.
4. Have the ability to obtain protocols or rules of accessing ideas for later analysis.
How GDSS Can Enhance Group Decision Making
1. Improves the pre-planning process.

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2. Increases the participation of members as they contribute simultaneously.

3. Due to fact that members are anonymous the meeting atmosphere is conducive.
4. Its free of criticism due to the reduction of unproductive inter-personal conflicts.
5. Idea organization and evaluation are used to modify the results.
6. Documentation of meeting and preservation of organizational memory.
7. Access to external information.

Executive Information System /Executive Support System (E.S.S)

These are information system at the strategic level to address the non-structured
decision making through advanced graphics and communication. It combines internal
and external data to create a generalized computing and communications environment
and thereby assist the senior executives monitor the organization performance, tracks
the activities of competitors, spot problems, identity opportunities and focus trends.
ROLE OF E.I.S:
1. Executive are bound to receive fixed formats of reports e.g. weekly or monthly which
can easily lead to data over-load.
EIS solves the problem by supplying easy to use desktop analytical tools and online
data displays. These tools help to drill down the information i.e. being able to more
from summarizes to the details.
2. Provide managers with minimum computers experience with a common user friendly
software tool e.g. a spreadsheet for analytical purposes.
3. To solve the limitation of having to use data from systems designed for different
purposes e.g. data from a sales TPS should provide essential information for
marketing purposes.
4. Provide managers with external data e.g. current stock market news, industry trends
and competitor information. These data can be illustrated as follows:-

No. Area Historica Curren Forecas

l 2017 t 2018 t 2019
1. Overall performance
Total sales √ √ √
Total costs √ √ √
2. Summarized financial data
- Sales by √ √ √
division, by product, by √ √ √
customer cost by category, X √ √
product cash flow
3. External data
Economic trends √ √

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Industry trends √ √
Competitive analysis √ √
Consumer analysis √ √
4. Personnel
Performance data √ √ √
Availability of key √ √
personnel
5. Project status and promotional √ √
plans

Characteristics of E.I.S
• They provide immediate and easy access to information reflecting the key
success factors of the company and its subsidiaries.
• They use user-seductive interface e.g. color graphics and video which help the
user to grasp trends at a glance.
• Provide access to a variety of databases both from internal and external
sources through a uniform standard interface.
• Provide both the current status and the projection of data.
• Allow easy tailoring to the preferences of a particular user or group of users e.g.
Windows XP.
• They have the capabilities of drilling down the data.
• They create a generalized computing and communication environment rather
than providing any fixed application of a specific capability.
• They are designed to incorporate data about external event. e.g. new tax data
on competitors but also use summarized information from the DSS and the MIS.
• They filter/compress and track critical data emphasizing the reduction of time
and effort required to obtain executive information.
• Information is the average of internal and external data which are highly
summarized.
• The processing involves the production of graphics and simulations whereas the
information outputs are projections and responses to the queries of the senior
managers.
Developing E.I.S
Executive need change rapidly and so high level executive expect success the first time.
This implies that the developers of E.I.S must consider the following:-
1. Using prototyping techniques to develop a user-friendly system.
2. Including a facility for environmental scanning that uses internal and external data
to detect problems in organizational environment, strategic trends and
opportunities.

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3. Developing a system that is going to neutralize resistance that is likely to occur

due to the E.I.S potential of giving top executives the capabilities of examining
manager’s work without their knowledge.
4. Developing a system whose benefits can be quantified after it becomes
operational. This is because there is a problem of justifying the cost of a system
that primarily supports unstructured work.

Elements of a successful E.I.S

1. Standard Reports – the ability to navigate easily via large amounts of data. This
can include text, reports, numerical table and projects status reports e.g. Gantt
Charts, PERT and network analysis.
2. Drill-down capabilities:-
3. Short term issues: Ability to set and delete issues very quickly without the help of
I.T staff.
4. Exceptional reporting capabilities.
5. Executive briefing: Manager should be able to select screens of data, text or
graphs and download them to a standard workstation for later review and
preservation at meetings.
6. External data – Most businesses have sources of specific industry data that is
important for the operation of the data. The E.I.S is able to filter this key
information.
7. News – News delivered electronically should be more current and focused that
those via the print media.
8. Data analysis – This should include abroad range of functionalities from a simple
calculation to sophisticated modeling software.
9. Executive mail – This allows managers to incorporate Emails and attachments
with minimum keyboard interactions.
10.Time management – The time management component of an E.I.S should
provide a calendar and a suspense file for keeping track of important dates and
timers.
11.Data retrieval – It should provide access to corporate files and databases which
are linked to public databases.
Benefits associated with E.I.S
1. Help to save the staff and executive time.
2. Help executive improve their understanding of the company and its environment.
3. They eliminate communication bottlenecks between the staffs, the management
and the executives which can show down the decision making process.
4. They provide executive with summarized and custom tailored data.
5. Their ability to analyze, compare and highlight trends ensure clearer and up to-
date information.

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6. Flexibility in their use in that they put the data and the tool in the hands of
executives without addressing specific problems or imposing solutions.

Problems Associated With E.I.S

1. The executive success failure will have a major impact on organization.
2. Line and staff managers are uncomfortable with executive access to detailed
operational data especially if they have no time to do their own analysis before the
executive can access the data.
This may lead to situations where some data may be withheld from the databases.
3. Using an E.I.S may not be compatible with the management styles of making
executives used to working via others.

What is decision making?

Decision making is an integral part of management and occurs in every function and at all levels. Naturally the
type of decisions taken varies enormously but all decision makers have to go through a similar process. All of
them must decide by some means to choose the outcome or outcomes which are considered necessary or
desirable to them and to do so after some form of appraisal of the situation.
H.A. Simon, a leading authority on management decision making, considers that decision making comprises
four principal phases: finding occasions for making decisions, finding possible courses of action (i.e.
alternatives), choosing among courses of action, and evaluating past choices.

Figure shows a summary of these phases using Simon’s terminology

Phase 1 Intelligenc Searching the environment for conditions calling for decisions.
e Design
Phase 2 Inventing, developing and analyzing possible courses of action. This involves processes to und
solutions and the testing of solution for feasibility.
Selecting an alternative or course of action from those
available. A choice is made and implemented. Assessing past choices.
Phase 3Choice

Phase 4Review

It is important to realize that although there is a general flow from intelligence to design to choice to review, at
any time there could be a return to an earlier phase. For example, a decision maker in the choice phase, who
finds no suitable alternative among those currently available, would return to the design phase to develop more
alternatives. Decision making is an iterative process and although it is useful to separate out the various phases

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in order to discuss them, very few decisions are taken in this neat, logical sequence. There is feedback/
interrelationships between decisions; there is flair, intuition, judgment and creativity.
Decision making is based on information. Information is the trigger to knowing there is a problem. Information
is needed to define and structure the problem, to explore and choose between the alternative solutions and to
review the effects of the implemented choice.
Simons model of decision making

1. Is there a problem? Intelligent Individuals collect information to identify problems

or opportunities. This requires exceptional
reporting and uses MRS & TPS.

2. What are the alternatives? Design As you design you may make use of simulation and
prototyping which utilizes DSS and KWS

3. Which should you choose? This require “what if” simulation and uses DSS and
Choice other large models.

The decision is put into effect and reports on

4. Is the choice working progress this requires graphics and charts.
Implementation

Programmed and non-programmed decisions

Simon classified decisions into two categories according to the extent that the process of decision making can
be pre-planned. The categories are programmed and non-programmed, as follows;
• Programmed decisions
Characteristics: repetitive, routine, known decision rules or procedures, often automated, usually involve
'things' rather than people, can be delegated to low levels in the organization. Examples: inventory control
decisions, machine loading decisions, scheduling.
• Non-programmed decisions
Characteristics: novel, non-routine, decision rules not known, high degree of uncertainty, cannot be
delegated to low levels, may involve 'things' but always involve people. Examples: acquisitions, mergers,
launching new products, personnel appointments.
• Semi-structured decisions.

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These decisions are partly programmable and partly rely on decision maker judgment.

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Note: alternative terms for these two categories are structured and unstructured.
The two categories should be thought of as the extreme ends of a range of decision types with many decisions
containing elements of both categories. The terms programmed and non-programmed are not related to
computer processing. They refer to the nature of the decision process and to the extent that the process can be
pre-planned.
There is some relationship between the level of management and the decision type: broadly more programmed
decisions at lower levels and more unstructured decisions at higher levels, but this is not an absolute rule. Some
high level decisions contain structured elements, an example being a costly plant replacement decision which is
likely to be taken at the highest level and for which decision rules are available using replacement analysis and
investment appraisal techniques.
Levels of decision making
Decision making takes place at each level of management in an organization although there are markedly
different characteristics at each level. Each level has substantially different information requirements. The
figure below summarizes the main characteristics and information requirements of the various levels.

Management level Decision characteristics Information characteristics

Long time horizons, large-scale Largely external, informal sources

resources, much creativity and important, forward looking, qualitative
Strategic judgment, usually unstructured, information important, precision
problems difficult to define, infrequent, unimportant, instant access not vital, wide
much uncertainty ranging, incomplete

Tactical
Repetitive, short time scale, small-scale Largely internal, mainly historical,
resources, usually structured, clear detailed, often quantitative, high
Operational objectives and decision rules, little or precision, instant availability often
no discretion critical, narrow in scope, comprehensive

The tactical level of management occupies an intermediate position between the two extremes with some of the
characteristics of both. Much of the development of formal aids to decision making, such as,, for example,
optimizing models has been directed at the operational and tactical levels of management. At the strategic level,

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decision making is much more dependent on human factors and judgment. Such decision making is based on
guided trial and error and because of uncertainty and ambiguities, all possibilities cannot be explored. This type
of decision making is known as heuristic and is based on rules of thumb rather than explicit decision rules.

Figure below gives examples of decision making at the three levels with typical information requirements.
In practice, decisions should be taken at the level where they are most effective.
Managemen Decision examples Information requirements
t level
Strategic
Mergers and acquisitions, new product
Market and
planning,
economic
capital
forecasts,
investments,
political
financial
and social trends, legislative,
structuring. technological constraints and opportunities
Pricing, capacity planning,
budget preparation,
purchasing contracts. Production scheduling,
maintenance, reordering, credit approval.
Tactical Cost and sales analyses, performance measures,
summaries of operations/production, budget/actual comparisons, etc.
Sales orders, production requirements, performance measures, custom
deliveries, dispatches, etc.
Operational

Peter Drucker says decisions should be made at the lowest possible level which accords with their nature, and as
close to the scene of action as possible. They should always be taken at the level which ensures none of the
activities and objectives affected is forgotten.
There is increasing evidence that many decisions are being taken at lower levels in the hierarchy. Authority to
take decisions is being delegated down the line/ especially in modern service industries. This process is called
empowerment and means that the organization is able to answer queries and take a variety of decisions more
quickly thus providing a better and more flexible service. Empowerment is also one of the reasons why some
middle management jobs are disappearing.

Decision making cycle

Steps Involved In Decision Making Process

Decision-making involves a number of steps which need to be taken in a logical manner. This is treated as a
rational or scientific 'decision-making process' which is lengthy and time consuming. Such lengthy process
needs to be followed in order to take rational/scientific/result oriented decisions. Decision-making process
prescribes some rules and guidelines as to how a decision should be taken / made. This involves many steps

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logically arranged. It was Peter Drucker who first strongly advocated the scientific method of decision-making
in his world famous book 'The Practice of Management' published in 1955. Drucker recommended the scientific
method of decision-making which, according to him, involves the following six steps:

1. Defining / Identifying the managerial problem,

2. Analyzing the problem,
3. Developing alternative solutions,
4. Selecting the best solution out of the available alternatives,
5. Converting the decision into action, and
6. Ensuring feedback for follow-up.

1. Identifying the Problem: Identification of the real problem before a business enterprise is the first step in the
process of decision-making. It is rightly said that a problem well-defined is a problem half-solved.
Information relevant to the problem should be gathered so that critical analysis of the problem is possible.
This is how the problem can be diagnosed. Clear distinction should be made between the problem and the
symptoms which may cloud the real issue. In brief, the manager should search the 'critical factor' at work. It
is the point at which the choice applies. Similarly, while diagnosing the real problem the manager should
consider causes and find out whether they are controllable or uncontrollable.
2. Analyzing the Problem: After defining the problem, the next step in the decision-making process is to analyze
the problem in depth. This is necessary to classify the problem in order to know who must take the decision
and who must be informed about the decision taken. Here, the following four factors should be kept in mind:

• Futurity of the decision,

• The scope of its impact,
• Number of qualitative considerations involved, and
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• Uniqueness of the decision.
3. Collecting Relevant Data: After defining the problem and analyzing its nature, the next step is to obtain
the relevant information/ data about it. There is information flood in the business world due to new
developments in the field of information technology. All available information should be utilized fully for
analysis of the problem. This brings clarity to all aspects of the problem.
4. Developing Alternative Solutions: After the problem has been defined, diagnosed on the basis of
relevant information, the manager has to determine available alternative courses of action that could be used
to solve the problem at hand. Only realistic alternatives should be considered. It is equally important to take
into account time and cost constraints and psychological barriers that will restrict that number of alternatives.
If necessary, group participation techniques may be used while developing alternative solutions as depending
on one solution is undesirable.
5. Selecting the Best Solution: After preparing alternative solutions, the next step in the decision-making
process is to select an alternative that seems to be most rational for solving the problem. The alternative
thus selected must be communicated to those who are likely to be affected by it. Acceptance of the decision
by group members is always desirable and useful for its effective implementation.
6. Converting Decision into Action: After the selection of the best decision, the next step is to convert the
selected decision into an effective action. Without such action, the decision will remain merely a declaration
of good intentions. Here, the manager has to convert 'his decision into 'their decision' through his leadership.
For this, the subordinates should be taken in confidence and they should be convinced about the correctness
of the decision. Thereafter, the manager has to take follow-up steps for the execution of decision taken.
7. Ensuring Feedback: Feedback is the last step in the decision-making process. Here, the manager has to
make built-in arrangements to ensure feedback for continuously testing actual developments against the
expectations. It is like checking the effectiveness of follow-up measures. Feedback is possible in the form of
organized information, reports and personal observations. Feed back is necessary to decide whether the
decision already taken should be continued or be modified in the light of changed conditions.

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CHAPTER 3
MANAGEMENT OF INFORMATION SYSTEM RESOURCES

CONCEPTS OF INFORMATION RESOURCE MANAGEMENT (IRM)

The term "Information Resources" incorporates three broad categories of "information stuff" essential to the
modern business enterprise: the large mass of stored data (DATA); the huge volume of application system
program code (APPLICATION SOFTWARE); and the numerous networked hardware components, along with
the operating programming that makes it all work (TECHNOLOGY). These three components, working
together, allow the enterprise to produce and use the information required to effectively operate, compete, and
manage on a daily basis. The information resources of most large enterprises represent a significant cost factor,
yet interestingly, most enterprises do not manage these critical and expensive resources like they do all other
resources. All of the "Big Five" resources (human, financial, equipment, material, and facilities) have very
effective management discipline, based on several universal resource management principles:

• Responsibility and authority must be clearly designated to manage the limited resource on behalf of the
enterprise.
• The resource is not free; limitations must be recognized, and managed so there is enough when and
where needed, but waste and unused excess are costly mistakes.
• The resource must be controlled, and allocated so it is available when and where needed, and should
serve the highest priorities first.
• The resource must be constantly tracked: the enterprise must always know how much of the resource it
has, where it is located, what condition it is in, how to access it when needed, etc.
• The resource must be properly stored and maintained so that it is ready and usable when needed.
• The resource must be forecast - the enterprise must think and plan ahead to ensure it will have adequate
supply of the resource when needed.

So, the term "Information Resource Management" simply means changing the way typical IS/IT is implemented
within the enterprise, so that it manages the information resources (DATA, APPLICATION SOFTWARE, and
TECHNOLOGY) like any other enterprise resource - the principles of how to properly and effectively manage it
are exactly the same.

The enterprise must establish effective management control of the data resource, or it will never fully achieve
the payoff: faster, cheaper, better business operations, and significantly greater business flexibility, innovation,
and change. Data Resource Management (DRM) is a critical part of the IRM environment.

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Most enterprises today are critically dependent upon automated information for both daily operation and
management control. Today, information is the most important and highest-leveraged resource the enterprise
controls -- the means by which all other resources are managed. Yet, few businesses have begun to exploit the
enormous strategic potential of a well-integrated information environment. Most enterprises function at a small
fraction of their potential productivity with a set of terribly disintegrated, inconsistent, and often redundant
application systems, operating on an underlying redundant, inconsistent, and untimely data mess. The main
obstacles to exploiting the information resource are internal to the enterprise, and can be easily overcome - it is
truly a common sense proposition.

This informational (not skill-building) seminar targets senior management of the enterprise, and strikingly
contrasts the way we currently manage enterprise resources (human, financial, material, equipment, and
facilities), and the vastly different way we currently (mis)manage information resources of the enterprise. The
seminar also contrasts the IRM environment with the traditional "disintegrated application systems"
environment embraced by most enterprises today, and shows exactly how and why the IRM approach solves the
problems inherent in the "dis-integrated systems" approach. It shows how simple application of well-
recognized, time-proven, routinely-practiced management discipline to this stuff called "information" will
remedy the massive information messes so prominent today. An integrated information environment is a
strategic necessity today, and is not the result of accident nor random motion. The react-mode IS/IT
Organization within the enterprise today must be empowered to carefully plan, model, build/acquire, and
maintain this integrated information environment, not to just react to immediate need of the moment. The need
for the enterprise to change rapidly and affordably and the accelerating rate of change in computer technology
makes IRM not only a proactive, but a defensive necessity in today's economy. Ironically, any business or
government agency today would function significantly faster, cheaper, better, and more flexibly using less than
10% of the stored data that they currently attempt to manage, less than 10% of the existing program code
they've bought/built, and a fraction of the computer technology (hardware and operating software) they
currently manage. Integration means shaking it all down, pressing it together.

One of the dilemmas facing today's manager is that on the one hand they seem to be suffering from information
overload, yet on other hand, they often complain about shortage of information needed to make vital decisions.

Symptoms of overload are a growth of incoming information, including electronic mail, an explosion in the
volume of information sources. Symptoms of scarcity are the lack of vital information for decision making,
unexpected competitor moves and the inability to find the relevant 'needle in the haystack'

There is also the crucial problem of exploiting an organization’s proprietary information as a strategic asset.
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Underlying these problems is that of having "the right information, in the right place, in the right format, at the
right time".

What is the Solution?

Partial solutions include Executive Information Systems (EIS), On-line and CD-ROM data-bases, alerting
services. A more encompassing solution is to adopt the principles of Information Resources Management
(IRM) (not to be confused with an information management or information systems). Whereas the value (often
declining!) of tangible assets, such as property and office equipment, is regularly assessed and audited, similar
processes are lacking for intangible assets, such as information and knowledge, whose asset value is increasing
in many organizations.
Information Resources Management (IRM) is an emerging discipline that helps managers assess and exploit
their information assets for business development. It draws on the techniques of information science (libraries)
and information systems (IT related). It’s an important foundation for knowledge management, in that it deals
systematically with explicit knowledge. Knowledge centers often play an important part in introducing IRM
into an organization.
The five key activities for effective IRM management:
• Identification what information is there? How is it identified and coded?
• Ownership- who is responsible for different information entities and co-ordination?
• Cost and Value A basic model for making judgments on purchase and use
• Development increasing its value or stimulating demand.
• Exploitation Proactive maximization of value for money.
Information Systems Resources (ISR) enables the use of information systems in administrative functions
so that those functions may be conducted in the most effective way possible.
Information Systems Resources includes Networks, Hardware, Software, Data & People

What are the resources an information system needs?

Discover how networks, hardware, software, data and people work together to create usable information.

Understanding Data

We've established that an information system is the combining of users, technology and processes to complete
a specific goal. A stakeholder isn't only a user but is someone who has any type of interest in a particular
process. These people utilize hardware and software, typically in a network format, to process raw data into
usable information.

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Data is one piece of a record. Individually, some of your datum might be your first name, middle name, last
name, address, city, state, zip, phone number and occupation. When put together, we see a record.

Hardware and Peripherals

The components of the system you can physically touch - the system unit (tower, desktop, laptop), internal
devices and peripheral devices (keyboards and monitors) - are called hardware.

Specifics of peripheral devices are provided in many other ways, but think of them as hardware that surrounds
the system unit.

Importance of managing ISR

Few organizations have developed a comprehensive IRM strategy. Those that have started with some of its key
processes of information audit, and information mapping cite the following benefits:
• Identifies gaps and duplication of information
• Clarifies roles and responsibilities of owners and users of information
• Provide costs saving in the procurement and handling of information
• Identifies cost/benefits of different information resources
• Actively supports management decision processes with quality information

Some of the issues that it addresses are:

Strategic - the information needs to support the implementation of business strategies; also the way that
information itself can be a key lever of strategy (in terms of new product and service opportunities)
Organizational - ownership, evaluation, fragmentation, isolation from processes, the politics of information
Structural Integrating external and internal information, its categorization, refining it from data into classified
actionable 'chunks'.
Systems User accessibility, interface to sources, multiple databases, retrieval, usability
Human Processing capability, overload incentives to share.

How to Manage Information as a Strategic Asset

4. Understand the role of Information.

Information can add value to your products and services. Improved information flows can improve the quality
of decision making and internal operations. Yet many managers do not fully understand the real impact of

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information – the cost of a lost opportunity, of a poor product, of a strategic mistake – all risks that can be
reduced by using the appropriate information.
5. Assign Responsibility for Leading your IRM Initiative.
Developing value from information resources is often a responsibility that falls between the cracks of several
departments – the user departments in different business units, and corporate planning, MIS units or
librarians..
6. Develop Clear Policies on Information Resources
Develop policies for ascertaining information needs, acquiring and managing information throughout its life
cycle. Pay particular attention to ownership, information integrity and sharing. Make the policies consistent with
your organizational culture.
4. Conduct an Information Audit (Knowledge Inventory).
Identify current knowledge and information resources (or entities), their users, usage and importance. Identify
sources, cost and value. Classify information and knowledge by its key attributes. Develop knowledge maps.
5. Link to Management Processes.
Make sure that key decision and business process are supported with high leverage information. Assess each
process for its information needs.
6. Systematic scanning.
Systematically scan your business environment. This includes the wider environment - legal and regulatory,
political, social, economic and technological - as well as the inner environment of your industry, markets,
customers and competitors. Provide selective and tailored dissemination of vital signs to key executives. This
goes beyond the daily abstracting service provided by many suppliers.
7. Mix hard/soft, internal/external.
True patterns and insights emerge when internal and external data is juxtaposed, when hard data is evaluated
against qualitative analysis.
7. Optimize your information purchases.
You don't have to control purchasing, but most organizations do not know how much they are really spending
on external information.
8. Introduce mining and refining processes.
Good information management involves 'data mining', 'information refining' and 'knowledge editing'. You can
use technology such as intelligent agents, to help, but ultimately subject matter experts are needed to repackage
relevant material in a user friendly format. One useful technique is content analysis, whose methods has been
developed by Trend Monitor International in their Information Refinery, and is used in the analysis of services.
The classifying, synthesizing and refining of information combines the crafts of the information scientist,

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librarian, and business analyst and market researcher/analyst. Yet many organizations do not integrate these
disciplines.
9. Develop Appropriate Technological Systems
Continual advances in technology increase the opportunities available for competitive advantage through
effective information management. In particular, intranets, groupware and other collaborative technologies
make it possible for more widespread sharing and collaborative use of information. Advances in text retrieval,
document management and a host of other trends in knowledge management technologies have all created new
opportunities for providers and users alike.
10. Exploit technology convergence.
Telecommunications, office systems, publishing, documentation are converging. Exploit this convergence
through open networking, using facilities such as the World Wide Web, not just for external information
dissemination but for sharing information internally.
11. Encourage a Sharing Culture
Information acquires value when turned into intelligence. Market Intelligence Systems (MkIS) are human
expert-centered. Raw information needs interpretation, discussing and analyzing teams of experts, offering
different perspectives.

Information as a resource

Traditionally the following 3 factors can be termed as essential in any economy:-

1. Human Resource (labor)
2. Finance (capital)
3. Raw materials

Over the past 2 decades information has come to be recognized as another factor of
production. Businesses require information about their competitors, their suppliers,
customers and standard and market trends. Information is a resource on its own, as
well as an asset to other.
It falls within the resource hierarchy which starts with date, which leads to information,
coming together as knowledge and resulting in wisdom.
The final step is the integration of the knowledge into wisdom, which is information
which has been made useful by theory relating the bits of knowledge to each other.

There are 6 characteristics of information as a resource:-

1. Information is expandable:

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Its recognized that for specific purposes information may wear out but in general
the more we have, the more we use and the more useful it becomes.

2. Information is compressible
It’s possible to concentrate, integrate and summarize information for easier
handling.

3. Information is substitutable
Information can and does replace hand, labor and capital. It’s the use of computers
and telecommunication that aids in these phenomena.

4. Information is transportable
Information can be tapped into just about anywhere, this has led to the idea of
being remote as much more difficult to achieve since people and information can e
taken to the remotest of places.

5. Information is diffusive
These are the ability to information leek. This leakage allows us to have more and
more of us to have it.

6. Information is shareable
No exchange transaction of information can take place, only sharing transactions
and this leads to an entire sharing environment.

Information Society
Definition;
An information society is a society where the creation, distribution, uses, integration and manipulation of
information is a significant economic, political, and cultural activity. The aim of the information society is to
gain competitive advantage internationally, through using information technology (IT) in a creative and
productive way. The knowledge economy is its economic counterpart, whereby wealth is created through the
economic exploitation of understanding. People who have the means to partake in this form of society are
sometimes called digital citizens. This is one of many dozen labels that have been identified to suggest that
humans are entering a new phase of society.
The markers of this rapid change may be technological, economic, occupational, spatial, cultural, or some
combination of all of these. Information society is seen as the successor to industrial society.
The characteristics of information societies
Information societies have three main characteristics.

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1. Information is used as an economic resource. Organizations make greater use of information to increase
their efficiency, to stimulate innovation and to increase their effectiveness and competitive position, often
through improvements in the quality of the goods and services that they produce. There is also a trend towards
the development of more information- intensive organizations that add greater amounts of value and thus
benefit a country’s overall economy.
2. It is possible to identify greater use of information among the general public. People use information
more intensively in their activities as consumers: to inform their choices between different products, to explore
their entitlements to public services, and to take greater control over their own lives. They also use information
as citizens to exercise their civil rights and responsibilities. In addition, information systems are being
developed that will greatly extend public access to educational and cultural provision.

3. The development of an information sector within the economy. The function of the information sector is
to satisfy the general demand for information facilities and services. A significant part of the sector is concerned
with the technological infrastructure: the networks of telecommunications and computers.

Increasingly, however, the necessity is also being recognized to develop the industry generating the information
that flows around the networks: the information-content providers. In nearly all information societies, this
information sector is growing much faster than the overall economy.
The creation of individual information societies is taking place within a much greater, international process of
change. Partly this is because the developing information systems are global, or at least international, in their
reach: satellite broadcasting systems do not recognize national boundaries; telecommunication networks
provide connections between countries and continents, while the Internet is perhaps the ultimate example of a
global system.
Both developed and developing countries are being transformed into information societies. Most of them are
concerned to use information to improve their relative competitiveness or, at least, to retain their position in an
increasingly competitive global market. The development of information societies represents a series of
attempts to achieve more general economic and social advance.
There is a concern, however, that the shift towards information societies will increase the gap between the
developed and the developing countries. To counter this, the World Bank has recently launched its Information
for Development initiative.

Challenges of Information societies

Methodological issues: defining and measuring the information society

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• It is proving very difficult to define and describe in quantitative terms information societies. We have
seen that it is possible to identify some common characteristics of information societies, but it is not at
all easy to go beyond generalized definitions, such as: an information society is one in which
information is used intensively as an aspect of economic, social, cultural and political life. This presents
a major problem for statisticians who have to collect the data that governments need for economic
management.
• It is more difficult, however, to define and measure the information activity that takes place within
organizations outside the information sector.
• The matter is further complicated by the intangible nature of information. It is a good that does not
easily fit into the economists’ scheme of things. Its value can vary widely, particularly over time, which
makes it very difficult for accountants to value it for company balance sheets. Also, the value of
information, unlike most other goods, does not decrease as it is consumed; indeed, the value may
increase as one piece of information is added to others.
• The globalization of the information sector poses further problems. Someone working in Africa can use
the Internet to obtain information about a firm operating in Europe that has been compiled by an
American-owned information company based in Switzerland using a database that was compiled by
Eurostat, the statistical arm of the European Commission. Who regulates the information? Under which
set of laws is it collected, compiled, delivered and consumed. If the user has to pay for the information,
where does the revenue go? Which governments are entitled to levy a sales tax on the information? To
which set of national accounts should the financial transactions be credited? It is possible to arrive at
answers to most of these questions, but in doing so we raise further questions about the ability of our
economic and statistical systems to cope with the changes that are taking place.

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CHAPTER 4

INFORMATION SYSTEMS PLANNING

Planning is primary management function which is a process of setting objectives for
the future and lay out the action necessary to reach those objectives. A plan is a
specific statement of objectives and gives the links by which a firm aims to achieve
this.
Many plans that are drawn up by managers are either financial, personnel or production
in nature. Planning can be strategic, tactical or operational.
Planning and controlling are related:-

1. Strategic Planning;
The purpose of this planning is to develop long-term objectives for the entire
organization and for its major business units and more so to specify the general
strategies for acquisition of resources needed to accomplish these objectives.
It includes the following:-
a) The establishment of broad long-term objectives for an enterprise.
b) Accessing the company’s current position relative to these objectives and in
particular considering the threats and opportunities provided by the
environment.
c) Considering alternative strategies for reaching the objectives in the
competitive business environment.
d) Outlining the organizational structure and the total resources needed to
implement the plan.
e) The planning for the implementation process.

The MIS strategic plan includes:-

ii) Statement of the objectives to be achieved.
iii) Projection of the future MIS environment.
iv) Projection of the future user environment.
v) Projection of the future industry environment.
vi) Definition and evaluation of strategic alternatives in relation to the
organization strategic plan and the selection of the preferred alternative.
vii) The establishment of the required infrastructure plans and the personnel
requirements.
viii) The plan for the organizational structure of the MIS department.
ix) A detailed financial plan indicating the benefit and the cost to be incurred.
x) The plan for the implementation of the strategic plan.

2. Tactical and Operational Planning

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This involves the prioritizing and laying out in detail the acquisition of hardware,
software and telecommunication equipment. This planning is expressed in terms of
the budgets which specify the resources committed to a given plan for a given project
or time period. Budgets can be fixed or flexible, and an organization can use
spreadsheet as the main budgeting tool.

Planning can be TOP-DOWNS whereby the process starts with the senior
management. This may ignore what is going on at the bottom.
It can also be BOTTOM-UP where the junior staffs are encouraged to come up with
their own departmental plans. However this may not align well with the strategic
objectives of the organization.

The role that information systems play in the planning process is to be used in
developing plans such as forecasting and identifying and comparing alternative
causes of action. There is need therefore to make use of financial ratios to justify our
various plans.

FINANCIAL RATIOS:

Information System Project Manager Technique

Planned financial projections produce ratios that indicate the performance of the
business unit. They include;-
1. Payback method
2. Net present Value (NPV)
3. Internal Rate of Return (IRR)
4. Accounting Rate of Return (ARR) or Return on Investment (R.O.N)
5. Cost benefit ratio
6. Profitability Index etc.

These are used to justify new systems, explain old systems and to develop quantitative
support for the adoption of various alternatives. The major limitation is to assume that all
the relevant alternatives have been examined and that all cost and benefits are known.
However in quantifying these in monetary terms, there are needed to classify whether
the cost and benefits are tangible or intangible.

a) Pay Back Method

These measures the time required to pay back the initial investment of a project.
Calculate the payback period for the following project.

Project 1 Project 2 Project 3

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Year Net cash Unlawfu Net cash Commutati Net cash Cumulativ
0 (1500) l (1500) ve (1500) e
1 600 (1500) 400 (1500) 300 (1500)
2 500 (900) 500 (1100) 500 (1200)
3 400 (400) 600 (600) 400 (700)
4 (0) 0 300 (300)
5 300 0
6 300 300
600

Advantages
1. It’s simple to calculate and understand.
2. It uses the project cash flow rather than the accounting profit and hence its more
objectively used.
3. It favors quick return projects which may produce faster growth for the company
and enhance liquidity.
4. Tends to minimize the risks to a company related to time.

Disadvantages
1. It ignores the time value of money.
2. It ignores the cash flows after the payback period.
3. It ignores the profitability of project or system in the long run.

Net Present Value (N.P.V)

This is the amount of money an investment is worth taking into account its cost,
earnings and time value of money.
The present value is the value in the current currency of a stream of payments to be
received in the future. From the following formula
Rate
Future = Present (1 x ) Time
100
Rate
F = P (1 + )+
100
Making P the subject of the formula. Equation then becomes

Future 1
P= R +¿ = Future Time
x R
(1+ ) (1+ )
¿ 100 100
= Future x Present value factor (Discount factor)
The value of present value factor are available from financial tables although they can
directly be manipulated from the formula e.g. considering the interest rate of 10% the
values can be determined as illustrated below:-
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1
= 10 t = 1
(
1 +
100 (1+0.1)t
1
=
(1.1)t

Time value
0 1
1
1 1 = 0.909
(1.1)
1 0.909 = 0.826
2 =
(1.1)2
1.1
1 0.826 = 0.751
3 =
(1.1)3
1.1

Consider the following example; an investment is being considered for which the net
cash flow has been estimated as follows (consider the interest rate to be 20%).
Year Net cash Discount factor Present value
0 (9500) 1.000 (9500) NNP > 0 ⟶ Invest
1 3000 0.833 +249.9 NPV = 0 ⟶ Breakeven Points
2 4700 0.694 +3261.8 NPV < 0 ⟶ A broad project
3 4800 0.579 +2779.2
4 3200 0.482 +1542.4

Advantages of N.P.V
1. It takes into account the time value of money
2. One can easily use the spreadsheet to calculate it.
3. It considers the whole project life and calculate the returns at expected times.

Advantages
1. It involves estimates of future returns and is thus subject to error.
2. It doesn’t set possible targets against which evaluations can be made.

Internal Rate of Return

This is the variation of NPV that takes into account the time values of money. This is the
rate of Return on profit that on investment is expected to earn. It’s the discount on
interest rate that will equate the present value of the project into the future cash flows
to the initial cost of the project.
This value can be determined graphically or by interpolation.

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N 1 I 2 −N 2 T
IRR =
1
N 1−N 2

N1 N1 x−I 1
−N 2 = I 2−x

NPV N1 (I2 – x) = -N2 (x –

I1) N1I2 – xN1 = -N2x +
N2I1
I1 N1I2 – N2 I1 = xN1x - N2x
I2 N 1I 2– N 2I 1
x x=
-NPV N 1−N 2

-N2

Consider this example

If I1 = 12%, N1 = 1400, I2 = 15%, N2 = -700
(1400 x 15)−(−700 x 12) 21000−(−8400) 29400
x= = = 2100 = 14%
1400−(−700) 1400+
I.R.R = 14% 700

Accounting Rate Of Return (Return On Investment)

This is the calculation of the Rate of Return in Investment by adjusting the cash inflows
produced by the investments for depreciation. It approximates the Accounting income
and by the investments.

Average Income
AAR (ROI) = Average Investment x 100%

= (Average income −Average depreciation

Initial Investment x 100%
Example:
Mana Company Limited intends to invest in two machines X and Y. Each of the two
machines will cost the company 200,000 to purchase and each has an estimated
economic life of 10 years after which there will be no residual value. The 2 machines are
expected to generate profits as follows;-
NB: The Net returns after tax but before depreciation

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YEAR X Y
1 40,000 60,000
2 50,000 40,000
3 30,000 50,000
4 10,000 30,000
5 20,000 20,000
6 30,000 18,000
7 15,000 14,000
8 10,000 8,000
9 5,000 3,000
10 30,000 30,000

Total profit before depreciation 240,000 273,000

Less depreciation on a straight line 200,000 200,000
Profits after depreciation 40,000 73,000

40,000
Diving by 10 years 73,000
10 10
Average income = 4,000 7,300

Initial Investment 2+final investment 200,000

2 +0
Average investment =
( ) =

= 100,000 = 100,000
4,000 7300
ARR = x 100% x 100%
100,000 100,000
= 4% = 7.3%

We are going to take project Y sine it has a higher value of percentage.

Example 2
Two Projects A and B with the following capital
expenditure Capital expenditure 75,000
75,000

The following are profits and losses

1 30,000 45,000
2 30,000 6,000
3 20,000 25,000
4 (10,000) (1,000)

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5 (10,000) 13,000

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Total profit 60,000 60,000

They are estimated to have a resale value of 5000 each.

Average income = 60,000

60,000 (12,000) (12,000
5
575,000+ 5,000 75,000+ 5,000
Average investment = = 40,000

12,000 2 2
AAR = 40,000 12,000 x 100
x 100 40,000
= 30% = 30%

Advantages of ROI/AAR
1. Uses available accounting information
2. It’s understood by managers

Disadvantages
1. It deals with accounting profits rather than the cash flow.
2. It doesn’t take into account the time value of money.
3. For different types of deprecation method doesn’t work well e.g. it only works well
in straight-line method because the depreciation is constant.

Steps involved in Information system Planning:-

Define objective What do we need to achieve

In what environment will the plan be
carried out
Develop premises
Identify alternative course What are some of general ways of
of actions bridging the gap between the present
and the objective
Choose a course of action Using appropriate systems such as a
DSS to select a course of action
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Formulate an implementation How will the course of action be planneeded time,
equipment, money, labor etc.
 Implementation and Carryout the required activities and
control
control the relevant premises.
MIS

Elements of Good Planning

1. VISION: This is a view of what top management has for organization. It create model that represent what
organization would look like and what it will achieve in future environment which it will operate.
2. MISSION: This is the bottom line purpose of organization i.e. what is why it exists.
3. GOALS: These are broad statement of the end results that organization intend to achieve in fulfilling its
mission.
4. OBJECTIVE: These are specific and tangible measures of result that organization want to achieve.
5. STRATEGY: A statement on how to reach the vision and achieve the objectives taking care of
environment available resources and constraints.
6. CONSENSUS AND COMMITMENT: The leadership must be dedicated to achieving the vision and
mission.

Information system planning in a Business

The next major step in planning process is the assessment of the organization from an information management
perspective.
During these steps the major processes that are necessary to accomplish the mission successfully are needed to
support the process. This can be done by the following:-

a) Development or validating business system plan

Business system planning (BSP) methodology was introduced by IBM in 1970s as a way to incorporate
information system strategy into business strategy. This methodology has other different name such as
Information System Planning (ISP), Information Requirement Studies (IRS).
Functions manager counter praising process of re-engineering will find that performing or updating a
business or information system planning studies, provides valuable time saving information that will
enhance process re-engineering. The objectives of business system planning are:-
1. To determine information system priorities
2. Plan long level information system based on business process.
3. Manage system resources to support business objective.
4. Assign system resources to high-return projects.
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5. Improve relationship between function and technique organization units.

Once the study has been conducted the following would be the benefit:-

1. Coordination of processes re-engineering plans.

2. Assurances that the date and application will be aligned with function process requirements.
3. It will be easier for the plan and resources to synchronize with implementation strategy.

The following task are performed in business system planning

i. Review /validate current business planning system architecture.
ii. Develop the business process or the organization maps.
iii. Prepare or validate information system architecture.
iv. Review and approve business system plan.
v. Identity major business process.

Review /validate current business plan

Many organizations has current business plan that should be reviewed and validated the important that this
review take organization model into account.

Identify major business process

Major process can be identified and defined from an enterprise wide perspective independent of process re-
engineering effort.
The rules of identifying process include;-
i) Processes are independent of organization structures.
ii) Processes are significant to the nature and purpose of enterprise.
iii) The naming convention for process are verb-name for e.g. Design-project, provide spare parts.
iv) Process redundancy is to be avoided.

Develop process plan/organization matrix

This is a chart or map that show the relationship between the business process sand various organization
department.

Functional client process Plan Engineer Construct Operate

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division division division division
Conduct study D
Plan project D M M
Design project M D M
Construct project M D M
Operate project D
Maintain project M M D

D – Decision making primary responsibility

M – Major involvements.

Prepare and validate architecture

This area involves preparation and validation of the following:-
i) Process and data entity
ii) Process /automated information system.
iii) The business strategy / process
iv) Business strategy /organization
v) Business strategy /data item.

Its importance to conduct the above so as;-

1. To understand how data is showed throughout the organization and between business processes.
2. To illustrate the process and information system interdependence.
3. To determine the relative important of data with respect to business strategy.
4. To identity organization responsibility and ensure optimum participation in the business process re-
engineering projects.
5. Understanding the legacy and migration system impact in process re-engineering effort.
Prepare review and approve business systems plan
A good plan report should have the following setting;
1. Executive summary
2. Background section explaining objectives of studies and the methods used.
3. Studies perceptive highlighting the objective and expressed in strategic plans
4. Findings with respect to IS needs, requirements and opportunities.
5. Potential constraints based on the information system infrastructure that may hinder process re-
engineering effort and suggested means of dealing with these constraints.
6. Information system strategy and recommendation based on implication of strategic plan.

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7. Appendices of details architecture including application protocols and data structure.

The business system plan should be reviewed and approved by all functional managers in organization, once
approved the plan is then passed into the next step that is process re-engineering.

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CHAPTER 5
INFORMATION SYSTEM PROJECT MANAGEMENT

Meaning and importance of information system project management

Project Management is a set of principles, methods and techniques for effective planning
of objective-oriented work, thereby establishing a sound basis for effective scheduling,
controlling and re-planning in the management of programs and projects.
In other words, it provides an organization with powerful tools that improve the
organization's ability to plan, organize, implement and control its activities and the ways
it uses its people and resources.
A project is a non-repetitive one-of-a-kind activity normally with discrete time, financial
and technical performance goals. Normally a complex effort, usually less than 3 years in
duration and it is made up of interrelated tasks performed by various organizations.
The project management tools and principles provide the means for;
❖ project breakdown into tasks and sub-tasks
❖ finding interdependencies between the tasks
❖ allocating resources, human and material and smoothing resources
❖ estimation for total project duration and budget
❖ monitoring more efficiently project progress
Project management ideas are equally applicable to small as well as very large projects
(with small and large number of tasks). However, the formal tools used are more
appropriate for rather large projects.

Information system project management techniques

Project Management Tools

There are many tools available to assist with accomplishing the tasks and executing the responsibilities. Some
require a computer with supporting software, while others can be used manually. Project managers should
choose a project management tool that best suits their management style. No one tool addresses all project
management needs. Program Evaluation Review Technique (PERT) and Gantt Charts are two of the most
commonly used project management tools and are described below

PERT is a planning and control tool used for defining and controlling the tasks necessary to complete a project.
PERT charts and Critical Path Method (CPM) charts are often used interchangeably; the only difference is how
task times are computed. Both charts display the total project with all scheduled tasks shown in sequence. The
displayed tasks show which ones are in parallel, those tasks that can be performed at the same time. A graphic
representation called a "Project Network" or "CPM Diagram" is used to portray graphically the
interrelationships of the elements of a project and to show the order in which the activities must be performed.

PERT planning involves the following steps.

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1. Identify the specific activities and milestones. The activities are the tasks of the project. The milestones
are the events that mark the beginning and the end of one or more activities.
2. Determine the proper sequence of activities. This step may be combined with #1 above since the activity
sequence is evident for some tasks. Other tasks may require some analysis to determine the exact order
in which they should be performed.
3. Construct a network diagram. Using the activity sequence information, a network diagram can be drawn
showing the sequence of the successive and parallel activities. Arrowed lines represent the activities and
circles or "bubbles" represent milestones.
4. Estimate the time required for each activity. Weeks are a commonly used unit of time for activity
completion, but any consistent unit of time can be used. A distinguishing feature of PERT is it's ability
to deal with uncertainty in activity completion times. For each activity, the model usually includes three
time estimates:
o Optimistic time - the shortest time in which the activity can be completed.
o Most likely time - the completion time having the highest probability.
o Pessimistic time - the longest time that an activity may take.

From this, the expected time for each activity can be calculated using the following weighted average:

Expected Time = (Optimistic + 4 x Most Likely + Pessimistic) / 6

This helps to bias time estimates away from the unrealistically short timescales normally assumed.

5. Determine the critical path. The critical path is determined by adding the times for the activities in each
sequence and determining the longest path in the project. The critical path determines the total calendar
time required for the project. The amount of time that a non-critical path activity can be delayed without
delaying the project is referred to as slack time.

If the critical path is not immediately obvious, it may be helpful to determine the following four times
for each activity:

o ES - Earliest Start time

o EF - Earliest Finish time
o LS - Latest Start time
o LF - Latest Finish time

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These times are calculated using the expected time for the relevant activities. The earliest start and finish
times of each activity are determined by working forward through the network and determining the
earliest time at which an activity can start and finish considering its predecessor activities. The latest
start and finish times are the latest times that an activity can start and finish without delaying the project.
LS and LF are found by working backward through the network. The difference in the latest and earliest
finish of each activity is that activity's slack. The critical path then is the path through the network in
which none of the activities have slack.

6. Update the PERT chart as the project progresses. As the project unfolds, the estimated times can be
replaced with actual times. In cases where there are delays, additional resources may be needed to stay
on schedule and the PERT chart may be modified to reflect the new situation. An example of a PERT
chart is provided below:

<="">

Benefits to using a PERT chart or the Critical Path Method include.

• Improved planning and scheduling of activities.

• Improved forecasting of resource requirements.
• Identification of repetitive planning patterns which can be followed in other projects, thus simplifying
the planning process.
• Ability to see and thus reschedule activities to reflect inter-project dependencies and resource limitations
following know priority rules.
• It also provides the following: expected project completion time, probability of completion before a
specified date, the critical path activities that impact completion time, the activities that have slack time
and that can lend resources to critical path activities, and activity start and end dates.

Gantt charts

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Gantt charts are used to show calendar time task assignments in days, weeks or months. The tool uses
graphic representations to show start, elapsed, and completion times of each task within a project. Gantt
charts are ideal for tracking progress. The number of days actually required to complete a task that reaches a
milestone can be compared with the planned or estimated number. The actual workdays, from actual start to
actual finish, are plotted below the scheduled days. This information helps target potential timeline slippage
or failure points. These charts serve as a valuable budgeting tool.
Sign of a failing information system project
◆ Lack of User Input
◆ Incomplete Requirements & Specifications
◆ Changing Requirements & Specifications
◆ Lack of Executive Support
◆ Technical Incompetence

Causes of information system project failure

• Lack of stakeholder/user input
• Incomplete and/or vaguely defined requirements or specifications
• Changing requirements or specifications
• Lack of executive support
• Insufficient planning
• Underestimated time and/or resources allocated for design, development, quality assurance, and/or quality
control
• Technological incompetence
• Insufficient resources
• Unrealistic expectations
• Unclear objectives
• Unrealistic timeframes
• New or untested technology
Explaining control measures and technique of a failing information system
project

◆ Greater top management support

◆ More commitment from users
◆ More power and decisions making authority
◆ Greater financial control and flexibility
◆ Greater Control over staff resources

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◆ Commitment to requirements and scope once specified
◆ More project management training
◆ Commitment to a stable project management method
◆ Alignment of IT project initiatives to business strategy
◆ Greater understanding of project management on the part of top management, project boards and clients
◆ Greater realism in setting targets. Several respondents railed against imposed rather than planned targets and
deadlines
◆ Establishment of a supportive project/programme office.
Implementation failures and success
Many systems that are implemented normally fail. The problems causing implementation
failure fall into multiple categories.

Design

Operation I.S. Data

Cost

This could be due to technical and non-technical resources.

1. Design – The actual design of the system fails to capture essential business
requirements or improve organizational performance. The system may be
designed with a poor user interface.
2. Data – The data is the system may have a high level of inaccuracy or
inconsistency. The information is certain fields may be erroneous or ambiguous.

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3. Cost– Some systems operate quite smoothly, but their cost to implement and run
on a production basis is way over the budget.
4. Operation – The system may not run well. The information isn’t provided in a
timely and efficient manner due to the result of breakdowns etc. The following
factor provides a measure of a system that is successful.
i. There is high level of system use
ii. User satisfaction with the system – this might include users opinion or
accuracy, timeliness and relevance of information and on the quality of
service and schedule of operations.
iii. Favorable attitude of users about I.S and the systems staffs.
iv. Achieved objectives, the extent to which the system meets is specified goals,
improved organizational performance and decision making resulting from the
use of the system.
v. Financial pay-offs of the organization i.e. by reducing cost or by increasing
sales.

Causes of implementation success or failure

The outcomes of implementation can be determined by the following:-
1. The role of users is the implementation process.
2. The degree of management support for the implementation process.
3. The level of complexity and risks of the implementation progress.
4. The quality of management in the implementation process.

What can go wrong during implementation process?

a) Analysis:
1. Time, money and resources haven’t been allocated to researching the problem.
The problem remains poorly defined.
2. Little or no time is spent in preliminary planning.
3. The project team isn’t properly staffed.
4. The information system promises results that are impossible to deliver.
5. Requirements are delivered from inadequate documentation of existing systems or
incomplete findings from systems study activities.
6. Users refuse to spend any time helping the project team gather the required
information.
7. Project analyst cannot interview users properly.

b) Design
1. Users have no responsibility towards the design of inputs, outputs and the
processes. The design is reflecting the bias of the technical staff
2. The system is designed only to serve current needs.

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3. Drastic change is the clerical procedures or staffing with or without proper

planning in the organization.
4. Financial specifications are inadequately documented.

c) Programming
1. Amount of time and money required for software development is underestimated.
2. Programmes supplied with incomplete specifications.
3. Not enough time is devoted to the development of the program logic.
4. Programs don’t take full advantage of structured design (they do spaghetti
programming).
5. Programs adequately documented.

d) Testing
1. Amount of time and money required for proper testing is underestimated.
2. The project team doesn’t develop an organized test plan
3. Users aren’t sufficiently involved in testing (no-user acceptance testing).
4. The implementation team doesn’t develop appropriate acceptance tests for
managerial review.

e) Conversion
1. Insufficient time and money are budgeted for conversion activity.
2. The system is made operated before its fully ready.
3. Not all stakeholders are involved .e. during training.
4. The system and users documentation is inadequate.
5. There is no performance evaluation and standards hence no framework for
measurement.
6. Insufficient information systems personnel are trained to support the system and
to make maintenance changes.

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CHAPTER 6

INFORMATION SYSTEMS ACQUISITION

Evaluating MIS Applications

The I.T. investment management process begins with the project selection process.
Projects being proposed for funding are put through a screening process to:-
1. Eliminate proposals that fail to pass minimal acceptance criteria.
2. Ensure that projects are being reviewed at the most appropriate organizational
level. Proposals that pass this screening process have their cost, benefits and risks
analyzed in-depth. Once this is accomplished, all fo the projects are compared
against some common decision criteria and ranked based on their relative
benefits, cost and risks. This process is appropriate in most projects and is the
essence of I.T. portfolio analysis. The organization should have a process that
outlines how to introduce projects for funding and how these projects would be
severed for relevancy to the business sand its objective. Specify the organization
should:-
i. Identity initial requirements that projects must meet before funding can be
released.
ii. Explain how the screening would be conducted.
iii. Establish roles and responsibilities for conducting the screening.

The screening criteria serves the following functions;-

1. Identity whether the project meets its initial acceptance requirements.
2. Ensure that the project is being reviewed at the most appropriate organizational
level.
3. Identify what level of management scrutiny is appropriate given the projects type,
size and risks.
On the basis of this screening process projects will either move or for more in-depth
analysis or will be rejected.

Analyzing And Ranking MIS Applications; Based On The Benefits, Cost And Risks Criteria.
Each application should have a business case developed that provides the management
justification for the system. The business case should identify the organizational needs
that the application is meeting or proposes to meet, provide information on the benefits,
costs, and risks of the application and establish proposed project development time
frame and delivery schedule.
The organization should have an audit function that is responsible for verifying and
validating the various analyses including cost/benefit analysis and risk assessment. This
validation should include;-

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1. Accessing all the alternatives that were analyzed and determining whether others
should have been included.
2. Reviewing cost and benefit estimates to ensure that they are accurate and
realistic.
3. Evaluating risks identified and determine whether others may be applicable.
4. Evaluating the sensitivity analysis that was conducted.
The organization should have the management information system that collects all the
applications information. Their mechanism for collecting and maintaining applications
will also be essential during the control and evaluation phase in order to:-

1. Help assess whether projects are still aligned with mission needs and
organizational objectives.
2. Determine whether applications are meeting planned performance goals etc.

Decision should rarely be made based on only one factor such as the project cost. Using
an assortment of decision criteria an organization can compare a number of factors.
The organization may assign weight for each category inorder to help prioritize a
particular application.
An important point for an organization in developing such a scoring model or decision
support tool is to define the scoring elements such as:-
1. Very poor
2. Poor
3. Average
4. Good
5. Excellent

The decision making process should help address difficulties associated with using
different units of measure for analyzing different kinds of applications. No matter how
vigorous or structured the organization’s decision making process is, the decision to take
the particular application lies with the management. If managers select applications that
score low when compared to other projects e.g. high risk, high return profits, the
justification for this should be documented and the applications progress constantly be
monitored.

i.e. Risks
High Low
High
Benefits Continuous Evaluate and Implement
examine

Low
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Avoid Day
to
day
tas
k

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Cultural dimension of IS development

When designing and understanding I.S the following check list should be considered:-
1. The environment in which the organization must function.
2. The structure of the organization, areas of specialization, standard operating
procedures (SOPs), cultural and politics of the organization.
3. The type of organization type of ownership, nature and style of leadership.
4. The extent of support and understanding of the top management.
5. The level in the organization at which the system resides.
6. Principle interests groups affected by the system, decision and business processes
that the information system is designed to assist.
7. Sentiments and altitudes towards workers in the organization who will be using the
information system, history of the organization e.g. past investment in I.T., existing
skills, important progress and human resource.
To design the above the developer must understand the hand and soft properties of the
organization.

Hard Properties:

Characteristics
1. The problem can easily be defined.
2. The objective and data can be objectively addressed.
3. The problem is self-contained.
4. The information requirements are known.
5. The solution to a problem can be recognized.
6. Standard solution techniques are often available.

Soft Properties:

Characteristics
1. Often difficult to define the problem.
2. This involves taste, values, opinions and judgments.
3. The problem is fuzzy-edged (not clearly defined) i.e. we aren’t so sure of what the
solution will look like.
4. Its people oriented.
5. It requires soft system methodology approach (SSM).

Soft system methodology (SSM)

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This is a user driver methodology developed by check-land. It’s a way of analyzing

unstructured and poorly defined problems in the real world. It recognizes that change is
constant. It has the following assumptions:-
1. Its intended as an aid for managing complex organizational issues in a
participative process. Its purpose is to enhance understanding of human
situations that are perceived as problematic.
2. In organization there are many divergent perspectives on issues to be dealt with
and each has to be considered.

SSM involves a process of enquiring which eventually leads to an action. It has seven
steps.
1. The problem or situation must first be entered into.
2. The prevalent culture and power relations are used to express the problematic
expression.
3. This findings are represented in a set of predefined solutions i.e. systems that are
thought to be relevant to the particular problem.
4. Conceptual models are built where the verbal concepts previously defined are
logically structured.
5. The model and redelity are compared.
6. Possible changes to the real world are considered. One of the framework that is
used in SSM is the CATWOE definition which attempts to give root definitions of the
problem.
7. It deals with who is doing what, for whom they are answerable, what assumptions
are made and in what environment this is happening.
C – Customer – The who or people who benefit or suffer from the
system. A – Action – Who carries out the transformation process
T – Transformation – What is the conversion of input into output.
W – Welt a schaning – Assumption behind the root definition.
O – Owner – Who can stop the transformation.
E – Environment – What are to fixed elements outside the organization or

system. Methods for acquiring MIS applications

1. SDLC: This is a methodology for developing an information system that partitions the
system development process into formal stages that must be completed sequentially
with a very formal division of labor between the user and the specialists.
The characteristics of this method are;
i. The development is in stage.
ii. Its advantages for large organizational systems e.g. T.P.S.

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iii. Supports project planning and control organization of team development

effort and the production of a maintainable system.
iv. Relatively inflexible with respect to the user requirements that change
during the development cycle.
v. There is vigorous documentation.
vi. It can be costly and time consuming.

2. Prototyping: This is the provision of a model that is given to the users for them to
clarify their requirements and gain a measure of confidence in the general approach.
In some cases the prototype is upgraded through several iterations, thoroughly
undergoing testing and documentation. In some cases the prototype may be thrown
away once the user requirements have been captured.

Characteristics
1. Development by gradually modifying an initial prototype based on feedback
from the users.
2. It’s a relatively fast development with early availability of the first model of the
system (the first version).
3. Its advantageous when user requirements are uncertain.
4. It works well for project that are limited in size and for systems that are being
computerized for the first time. Typical application of this is the development of
DSS.
5. Unless precautions are taken it may evolve into a quick and dirty system
hampering maintenance.

3. Internal development via end-user computing;-

This is the development of I.S by end-user with little or no formal assistance from
technical personnel.

Characteristics
i. It leads to increased user satisfaction and involvement.
ii. It reduces applications back-log (this is the queue of systems awaiting
implementation)
iii. It requires tools such as the fourth generation languages which are user
friendly.
iv. It leads to improve requirements determination.
v. It requires the involvement of information centers /helpdesk /hotlines.

Information Centres /HELP DESK

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This concept of an organization centre was developed in Canada in 1974 by IBM to

support end-user. Its part and parcel of the corporate MIS function and its usually
manned by technical people with extensive knowledge of the business. It has the
following functions.
a) Assisting the end-users in evaluating, selecting, installing and maintaining
hardware and software i.e. ‘they help you choose the best’.
b) Provide assistance to end-users in accessing the data resource
c) It provides guidelines for system development and provides also modalities for
preparing a prototype using a 4th Generation language.
d) It supports all the installed software’s within the organization.
e) Acts as a nit to provide standards of end-user systems.
f) It also provides a hotline or helpdesk in giving assistance to users. If thus help
keeping track for the request and offer trouble shooting techniques.
g) Assist in setting standard and supports internal auditors in auditing the systems.
h) It trains end-users in operating systems that are to be introduced in the
organization.

4. Off-the-shelf package
This is actually the purchase of a license to use the package. At times these packages
may have to be tuned to fit the needs of the user company. When purchasing an off-
the-shelf package, requests for proposals are sent to potential suppliers. This
document outlines the requirements of the organization and asks questions as to how
the vendor systems may satisfy them.
The selection is based on the characteristics of the software package and the
requirements that the user organization wants.

Characteristics
i. They are more reliable and have better documentation than internally produced
systems.
ii. They often need to adjust work within the organization to fit the needs of the
package.
iii. It may cost the company to forego competitive advantages, if this was done
internally.
iv. It satisfies most user requirements due to the fact that it has been developed
by experts.
v. Due to its mass production its relatively cheaper to buyer and that the
implementation is quick.

5. Outsourcing

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This is the hiring of external firms known as the software houses or system
integrators to develop and install systems that can easily be executed. They also
perform other services i.e. developing strategic plans to carryout organizational
functions. In the rather case we refer to this as facility management.
Outsourcing is necessary and appropriate in the following circumstances:-
1. When you want to reduce development cost.
2. Relief the firm from the burden of developing the system.
3. When the firms existing information systems capabilities are limited, ineffective or
technical inferior.
4. When the company needs to off-load some of pending workloads from the I.S.
department.

Problems of outsourcing
1. The firm may lose control over the I.S function i.e. No control over the type of
software or hardware being used.
2. There is total vendor dependency i.e. the firm may have to pay whatever the
vendor charges and accept whatever he does.
3. If the firm lacks expertise to negotiate a sound contractor, this dependency may
eventually lead to loose of control over the technical direction.
4. Trade secrets may leak to outsiders and the company may lose competitive
advantage.

Solutions to outsourcing problems

1. Organizations should manage the outsources as they would manage this over
information systems departments by setting priorities and targets to be met by
the outsourced company.
2. Establishment of criteria to evaluate the outsourcing vendor.
3. Designing outsourcing contracts carefully so that outsourcing functions can be
adjusted if the nature of the business changes.
4. A climate of trust should exist between both parties i.e. they should be in
partnership.

Agents involved in MIS projects

Development of information systems will involve the following group:-
1. End-user
End-User
2. M.I.S Developer
3. Management

Developers Management
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END-USERS:- It’s the function of the end-user to prepare their information requirement
and to ascertain the working environment of the system developed by making sure that
the system interfaces are proper.

M.I.S DEVELOPERS: - Their function is to implement system that satisfy user requirement
as well as the objectives of the management by establishing that they have adequate
resources, develop a quality system and meet the development constraints.

MANAGEMENT: - It’s the function of the management to control and allocate resources
that go in the development of the system and to approve the various stages in the
process.

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(CHAPTER 7)
ROLE OF INFORMATION SYSTEMS (IS) IN ORGANIZATION

Information Systems and Business Strategy

Strategic information systems are computer systems at any level of the organization that
change the goals, processes, services or environmental relationship to help the
organization gain a competitive edge.
They are different from strategic level systems that focus on the long-term decision
making. Strategic information systems reach all levels of the organization such that they
take care of all the planning aspects of a given business firm.
Strategic Level and Information Technology
To key question at the business level of strategy is how can we compete effectively in
this particular market? The most common strategies at these levels are:-
1. How to become the lowest cost producer.
2. How to differentiate your products or services form those of the competitors.
3. How to change the scope of the competition by either encouraging the markets
to the global level or by narrowing such that the company focuses on a small
niche not served by your competitors.
4. By establishing linkages with customers and suppliers.

No. Strategy Strategies Models IT techniques

level
1. Industry e.g. Cooperation v/s - Competitive -Electronic transactions
hotel services competition, licensing forces model - Communication
and standard. (5forces) or porter networks.
5 forces model -Inter organization system
- Network and information
economics partnership.
2. Firm e.g - Synergy Core competence -Knowledge systems and
Unilever (cooperation of 2 -Organizational wide
companies system
- Core competences
3. Business -Low cost producer - Value chain -Efficient customer
-Product differentiation model (9 forces response
-Market differentiation model) -Data mining
- Locking customer - Supply management
/suppliers -IT based products
and services
-Inter organization
systems.

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Application Of IS and Competitive Advantage in An Organization

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The value chain model:

Organization infrastructure
Support Human Resource Management
activities Technology
Procurement
Primary Inbound Operations Outbound Sales Servicin
activities logistics logistics and g
marketin
g

This model highlights the primary and support activities that add a margil of value to
products or services where information systems can be best applied to achieve
competitive advantage.
Primary activities would include:-
• Inbound logistics
• Operations
• Outbound logistics
• Sales and marketing
• Servicing

Support activities make to delivery of the primary activities of a firm possible e.g. the
organization infrastructure, human resource management, technology and procurement.
Competitive advantages when a company provides more value to a customer or when
they provide the same value at a lower cost. These can be achieved in the following way.
(i) A business can save money in the primary activities by having suppliers stick
to fight delivery schedules.
(ii) A company can make use of technologies such as CAD/CAM thus reducing the
cost of producing better goods in a manufacturing firm.
(iii) By having electronic scheduling and massaging systems or making use of
office automation technology to improve the company image.
(iv) By making use of information system in sales and marketing a company can
explore the capabilities existing on the internet.

Information System Product and Services

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Firms can use 1.5 to differentiate their products and create brand loyalty by developing a
new and unique product or service that isn’t easily duplicated by the competitors. To
following products and services were created or the basis of information system.

No. New product or Underlying technology

service
1. Online Banking Private communication networks and
internet
2. Cash management Enterprise wide customer accounting
systems systems
3. Global and national Worldwide telecommunication based
airline, hotel and reservation systems.
reservation systems
4. Fedex and other Delivery information acquisition device
overnight package (DIAD). This is used for capturing
dealing systems information of customers and tracking
connected to the headquarters.
5. Voice mails systems Company and network wide digital
communication system.
6. Automated teller Computerized accounting systems.
machines (A.T.M)

Market Focus /Niche

Companies create new market niches by identifying a specific target that they can serve
in a superior manner. This is called focused market differentiation. This can be identified
via data mining i.e. this is the analysis of large pools of existing data to find pattern and
rules that can be sued to guide decision making and predict future behavior e.g. we can
be able to extract information of people who buy a particular product such that we can
be able to initiate a sales deal based on the information provided by the data mining
tools e.g. a slow moving product that is normally bought by sugar manufacturing firms in
the month of April.

Supply Chain Management and Efficient Customer Response Systems.

Firms are able to use I.T. to eliminate or greatly reduce inventory by “supply claim
management”. This is the integration of supplier distribution and customer logistics into
one cohesive process e.g. Wall-Mart a leading supermarket in the USA has a continuous
replenishment system which surds order for new goods directly to supplier as soon as
customers pay up at the cash register.
Suppliers can also access Wall-Mart sales and inventory system using the web
technology.

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A supply chain is a collection of physical entries e.g. manufacturer, distribution centers,

retail outlets, people and information which are linked together into a process that
supplies good and services from the source by integrating demand planning, forecasting.
Materials requisition, order processing and transport. Supply chain management not only
lower inventory cost but can also deliver the product or service more rapidly to the
customer.
It also creates customer respond system that responds to the customer demands more
efficiently. The convenience and ease of using this rising the switching cost. These are
the costs incurred in terms of lost time and finances when changing from one supplier
system to a competition.

Firm Level Strategy and Information Technology

A business firm is typically a collection of businesses or of strategic units. Some of the
questions to ask on strategy are:-
1. How can the overall performance of this business unit be achieved.
2. How can IT contribute?
These can be answered in 2 ways i.e.
i) Synergies – when output of some units can be used as inputs to the
other or when two organizations pull markets together in order to lower
cost and generate profits.
ii) This is the time of two business entities so as to have a whole e.g. Kenya
Airways and KLM, COOPERS and Waterhouse, B.P and Shell.

Industry Level Strategy and I.T

The key question is how and when should we compete as opposed to corroborating with
others in the industry? This can be resolved via information partnerships which are a
cooperating alliance between 2 firms for the purpose of sharing information to gain
advantage.
i.e. two companies can join forces without actually weighting by sharing information e.g.
Banks maintaining information for loans to share with other banks.

Five Forces Model: (Porters Model)

Bargaining
power of
supplier
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 Threats of new Rivalry between
substitute
entrants to the traditional products or
MIS
market competitors
services

Bargaining
power of
customer

This is the model used to describe the interaction of the external influences, especially
threat sand opportunities that affect an organization strategy and the ability to compete.
Competitive advantage can be achieved by enhancing the firm’s ability to deal with
customers, supplier’s e.t.c. By working with other firms the organization can use I.T. to
develop and industry wide standard for exchanging information electronically which
forces all market participants to similar standards.

Network Economics
This is a model based on the concept of a network where adding another participants
entails a zero marginal cost but can create much longer marginal gain e.g. the larger the
number of subscribes to the interest the greater the value. Internet sites can be sued by
firms to build communities of users e.g. Microsoft Corporation uses I.T. to build a
community of software developers e.g. MSDN (Microsoft Developers Network) who help
in debugging, providing new application ideas and supplying customer with tips of the
new application.

In summary there are four competitive strategies i.e.

i) Market differentiation /Market focus
This is when a company is able to identify the segment of a market (Niche)
which it proceeds to serve in a supervisor version. The wide may be a customer
segment, a narrowly defined product or a geographical region e.g. family T.V.
It relies on an extensive customer database and demographic data i.e. data related
to population, as a potential tool in the niche (market identification).

ii) Cost focus /Lowest cost producer.

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If a company serves a narrow market segment with a product or services which it

offers at a significantly low cost than its competitors then this is the cost focus
strategy.
Strategic information systems change the organization, its products, services and
operating procedures.

iii) Product differentiation

When a company aims to distinguish its products or services from what offered by
the competitors. The distinguishing features may be the superior attributes of the
product itself e.g. Microsoft.

iv) Locking of customers /Suppliers

With strategy organization enhance or systems that make it difficult e.g. suppliers
and customers to leave its supply chain e.g. mobile banking or banking direct
where the Co-operative Bank and KCB ensure the continued loyalty of their
services.

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CHAPTER 8
INFORMATION SYSTEMS MAINTENANCE
Meaning and importance of information system maintenance

Systems maintenance involves cleaning, changing and enhancing the systems to make it
more useful in achieving users and organizational goals.
Maintenance is the process of modifying an information system to continually satisfy organizational and user
requirements. There is a vast difference between hardware and software maintenance in costs as well as in
objectives. This means changing the application to adapt to a new hardware or software environment.
In some cases an organization will encounter major problems that will involve re-
designing the entire system development process.

Importance of IS maintenance

1. Detect issues early, before they become problems

Whether the computer is new or old problems can pop up at any time. By using regular IT servicing one can get
the jump on problems and make arrangements so that the business isn’t impacted. Using regular IT servicing
one can also help reduce IT support costs by fixing during scheduled maintenance windows where other work is
scheduled.

2. Prevent against viruses and malware

Viruses and malware are a pain to any business, virus writers actively seek to disrupt the business and access
files the network. When the computer is infected a number of symptoms may be felt, from annoying slowdowns
to popup messages or contacts emails about strange email you apparently sent them. If your IT system is
compromised the business could be used as a launching pad to infect other businesses, which can have
consequences as companies start black listing your email address.

If antivirus software is kept up to date then it greatly reduces the chance of a virus infection as commonly
known IT loopholes are closed to hackers and virus writers.

3. Speed up the Computer

Over time, files that are stored on the computer can become disorganized and fragmented, this results in slow
loading times and delayed access to programs and files. By regularly running speed checks and smart
optimization, we can speed up the computers loading times and take care of those annoying pauses when one is
busy and need quick and efficient access to the files and software.

4. Keep Antivirus Software Up-to-date

Antivirus software is vital and every PC should be protected but having antivirus software installed isn’t the end
of your IT security – it needs to be up-to-date and working as intended .

5. Maximize Software Efficiency

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Computers age and over time they start to slow down – software packages that performed quickly and
efficiently to begin with, can become sluggish and have a negative impact on productivity. Because this
slowdown has occurred over many years, the computer user may have grown used to the issue and may think
that it is normal. It's not normal. Regular checks should be done to ensure that the software is running to its
maximum efficiency – often the answer is just a slight hardware modification or a quick clean out of programs
that are no longer needed.

Reasons for maintenance

Once a program is written its likely to require ongoing maintenance. To some extent it
may require tune-ups and repairs. Some of the major reasons for program maintenance
are:-
i) Changes in business processes.
ii) New requests from stakeholders, users and managers.
iii) Bugs or errors in the program.
iv) Technical and software problems.
v) Corporate mergers and acquisitions e.g. Glaxo Smithkline, HP-Compaq.
vi) Government regulations
vii) Changes in the operating or hardware on which the applications runs.

When it comes to making necessary changes, most companies modify their existing
programs instead of developing new ones. i.e. if new system needs are identified, then
the old programs are repeatedly modified to meet the even changing needs.
Over a period of time these modifications tend to interfere with the system overall
structure, reducing its efficiency and making it more difficult to modify future cases.

Types of maintenance
a) Adaptive maintenance refers to the changes made to a system to evolve its functionality to
changing business needs or technologies.
b) Corrective maintenance refers to changes made to a system to repair flaws in its design, coding, or
implementation.
c) Perfective maintenance refers to changes made to a system to add new features or to improve performance.
d) Preventive maintenance refers to changes made to a system to avoid possible future problems.
e) Predictive Maintenance: It pursues constantly know and report the status and operational capacity of the
installations by knowing the values of certain variables, which represent such state and operational ability.
To apply this maintenance, it is necessary to identify physical variables (temperature, vibration, power
consumption, etc.). Which variation is indicative of problems that may be appearing on the equipment. This
maintenance it is the most technical, since it requires advanced technical resources, and at times of strong
mathematical, physical and / or technical knowledge.

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f) Zero Hours Maintenance (Overhaul): The set of tasks whose goal is to review the equipment at scheduled
intervals before appearing any failure, either when the reliability of the equipment has decreased
considerably so it is risky to make forecasts of production capacity . This review is based on leaving the
equipment to zero hours of operation, that is, as if the equipment were new. These reviews will replace or
repair all items subject to wear. The aim is to ensure, with high probability, a good working time fixed in
advance.
g) Periodic maintenance (Time Based Maintenance TBM): the basic maintenance of equipment made by
the users of it. It consists of a series of elementary tasks (data collections, visual inspections, cleaning,
lubrication, retightening screws,…) for which no extensive training is necessary, but perhaps only a brief
training. This type of maintenance is the based on TPM (Total Productive Maintenance).

Systems Maintenance Techniques

1. Emergency Maintenance:

This is due to the malfunction or “bug” in the system where maintenance is urgent and usually calls for
immediate attention.

The malfunction is because it has not been tested completely, even though the system must have run perfectly
for months or even years. The information system user usually identifies the malfunction. Then a team of
analysts and programmers should rectify it if the malfunction is in computer program and caused by a system
input.

2. Routine Maintenance:

Routine Maintenance is required to keep systems performance in order as it reflects the organization
environment. The activities may be rewriting manual procedures, conducting training sessions, altering report
formats and contents and forming new processing logic for computer programs.

3. Special Reporting Requests:

These are periodic requests for tactical and strategic management information, which does not come under
routine production. These special requests can be satisfied directly by a user with a database management
system and the analyst assists in preparing the necessary procedures for the request, e.g. A special report on
selected products during a sales promotion or a special analysis of a particular vendor’s delivery performance.

Problems of Systems Maintenance:

The system always undergoes continued modification due to various reasons. The application systems need
changes and sometimes it takes away half or more of an organization’s allocated resources and time. Thus,
many organizations have adopted the principle of setting a budget for maintenance and perform only the highest
priority maintenance work.

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The personnel working in the information system do not wish to spend most of their time maintaining or trying
to patch up systems designed and implemented years ago. In some organizations, the programmers are rotated
once in a year.

By this the programmers will have new assignments, the experience base of the personnel is broadened, better
ideas are being proposed and evaluation of the personnel and the performance of two or more persons and the
several project leaders can be compared.

Maintenance programming causes more failure than the developing programming. If the maintenance
programmer is not familiar with the program, the management should assign complex maintenance problems to
the most knowledgeable people to avoid failure.

If the documentation is poor and changes will result in serious failure and to overcome this, the management is
responsible to ensure that all programs are properly documented.

Extra training cost will go up maintaining for older applications that use outdated programming languages that
run under primitive operating systems. The situations like facing inadequate documentation, a variety of
incompatible hardware/software configurations, outdated equipment and procedures will give rise to
manageable conditions with severe problems of maintenance that continue indefinitely.

Maintenance Costs
Several factors influence maintenance costs. Three of these are very important:
▪ defects,
▪ customers, and
▪ Documentation quality.
The number of latent defects refers to the number of unknown errors existing in the system after it is installed.
Because corrective maintenance accounts for most maintenance activity, the number of latent defects in a
system influences most of the costs associated with maintaining a system. If there are no errors in the system
after it is installed, then maintenance costs will be relatively low. If there are a large number of defects in the
system when it is installed, maintenance costs will likely be high.
A second factor influencing maintenance costs is the number of customers for a given system. In general, the
greater the number of customers, the greater the maintenance costs.
A third major contributing factor to maintenance costs is the quality of system documentation. Without quality
documentation, maintenance efforts can increase exponentially.
Techniques of maintaining an information system
Software companies and many other organizations use the following 4 categories to
signify the amount of change. These would include;-
1. Slip steam maintenance
2. Patch
3. New release
4. A version
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A Slip Stream
This is a minor upgrade – Typically a code adjustment or a minor bug fix, not worthy
announcement. It usually requires recompiling of the code and in so doing it may create
entire new bugs. These practice accounts for the various variations that we notice on a
software that is running or similar machine.

A Patch
This is a minor change to correct a problem. It’s usually an addition to an existing
program i.e. the programming code representing the system enhancement fix is
usually patched into or added to the existing system code e.g. Microsoft releases
patches which they call service packs to correct the bugs that were in the internet
explorer and Windows 95.
In correcting the problem this opened a way for hackers and unscrupulous website
operators to read the contents of the files of the users.

A New Release
Is a significant program change that often requires changes in the documentation of the
software?

A new version
Is a major program change that brings many new features?

THE REQUEST FOR MAINTENANCE FORM

Due to the amount of effort that can be spent for maintenance, many organizations
require a request for maintenance through a form so that modifications can be
authorized to the programs. The form is usually signed by a business manager who
documents the business scales for the need for change and identifies the priority of
these changes relative to the other work that has been requested.
The information system department that reviews the form and identifies the programs to
be changed determines the programs assigned to project or systems, estimates the
expected completion dates and develops a testing procedure. A cost benefit analysis
may be required if the change requires substantial resources.

Depending on the organization policies, the people who perform system maintenance
vary. In some cases the team that designs and builds the system also performs
maintenance. This gives the designers and programmers incentives to build systems
right from the onset. If there are problems, the designer and programmer will have to fix
them. In other cases organizations have a spate maintenance team.
The team is responsible for modifying, fixing and updating existing hardware.

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Financial implication of maintenance

For older programs the total cost of maintenance can be up to 5 times greater than
the cost of development. The average programmer can spend over 50% of the time a
maintaining existing programs instead of developing new ones. Furthermore as
programs get older the total maintenance expenditures in time and money increases.

High
Annual cost of maintenance

Low

The financial implication of maintenance makes it importance to keep track of why

systems are maintenance instead of simply keeping cost figure.
There is good reason why documentation is important. A determining factor in the
decision to replace a system is the paint at which its costing more to fix it than to
replace it.

Relationship between maintenance and design

Programs are expensive to develop but they are every more expensive to maintain.
Programs that are well designed and documented would be efficient, structured and
flexible and are less expensive to maintain. There is a direct relationship between design
and maintenance. More time spend in design upfront can mean less time spent on
maintenance later.

In most cases, the worth the extra time and expense to design a good system. The need
for a good design goes beyond the cost. There is a real risk in ignoring small system
problems when they arise as these small problems become large in future.

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Hardware maintenance
This is relatively straight forward and may include;
a) Formulating a service contract with the vendor.
b) Insisting on warranty during the procurement of equipment’s and enforcing the
warranty if the equipment fails.
c) Creating a technical section within the I.T. department with the responsibility of
maintaining all the equipment. This would depend on factors such as availability of
staff, convenience, cost and complexity of the system e.t.c.

Database maintenance
It’s carried out by a database administrator whose functions generally include;-
1. Participating in the physical database design.
2. The operation and maintenance of the DBMS.
3. Monitoring the performance of DBMS
4. Monitoring the security aspect of the database.
5. Liaising with the users and development team.
6. Providing assistance to users in utilizing effectively the database potential.
7. Acting as the custodian of the data dictionary.

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CHAPTER 9
ROLE OF ICT IN ORGANIZATIONAL CHANGE

Organization Change
Organizations in both the public and private sectors are faced with an apparently ever-increasing rate of change
and must learn to cope with this problem. Change occurs in many ways: competitive pressures (e.g. a
competitor introduces a new model or reduces prices), legislative changes (e.g. the introduction of the National
Curriculum in UK schools), the operating environment (e.g. the challenge of online share dealing to traditional
stock brokers), changing client/consumer preferences (e.g. the desire for more leisure or more environmentally
friendly products), the introduction of new technology (e.g. computer networks, third generation telephones)
and many more. In addition to dealing with the change itself, management must cope with the resistance to
change often encountered from staff, clients, customers or trade unions.

Not all pressures for change come from outside the organization. Successful managers seek to anticipate market
or environmental movements by initiating change within the organization and thus adopt a pro-active rather
than a reactive approach. One means of making radical changes in organizations is by adopting what is called
Business Process Re-engineering (BPR). BPR moves away from the conventional emphasis on tasks and
structures in order to focus on business processes. In effect, BPR is a systematic method of lateral thinking
which forces people to think beyond normal boundaries and structures. BPR is dealt with in detail in the next
chapter.

Organizations do not automatically adjust to change. Adaptation only occurs as a result of management actions.
These may cause changes in the way the organization takes decisions, in the processes used, in the services or
products, or in the structure of the organization itself. Only one thing is certain: the organization that clings to
rigid, traditional methods in the midst of rapid change will be an unsuccessful organization.

Ways to manage change

Many valuable pointers to the way more successful organizations manage change and innovation have come
from studies by Moss Kanter, Peters and Waterman, and others. Moss Kanter found that organizations that
adopt an integrated approach to innovation did it more successfully than those that adopted a more piecemeal
approach, which she termed 'segmentalist'. To overcome resistance to change and inertia she suggested the
following actions:
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• Top management must support innovation in a personal way and must think interactively.
• The organization must be made 'flatter', i.e. unnecessary layers of hierarchy should be removed and staff
'empowered' by authority being pushed downwards.
• Communication should be improved, especially across the organization, and staff mobility encouraged.
• Achievements should be highlighted and a culture of pride cultivated.
• Company plans should be made known earlier and more widely to enable staff to make suggestions and
contribute before decisions are made.
• An alternative way of considering the problem of resistance to change is the force field framework first
suggested by Lewin and developed by other workers such as laslen and Platts.
• Lewin suggested that change, or the lack of it, is caused by the interaction of two sets of opposing
forces. One set is termed the driving forces i.e. the forces attempting to bring about change, the other set
being termed restraining forces which act in the opposite direction and seek to maintain the status quo.

According to this framework, any attempt to bring about change requires conscious attempts to overcome
resistance to change otherwise change will not occur because the forces resisting it will be too strong.

Impact of IS as an agent of organizational change

(a) Rationalization

(b) Business Process Re-Engineering (BPR)

BPR is claimed to be a radical approach to the way organizations view work to be done. BPR was initiated by
Hammer and Champy and defined by them thus: Re-engineering... is the fundamental rethinking and radical
redesign of business processes to achieve dramatic improvements in critical contemporary measures of
performance, such as cost, quality, service and speed’.
BPR is a systems-oriented approach to organizing work and concentrates on Business processes not on
traditional tasks and structures.

Hammer and Champy describe processes as: 'A collection of activities that takes one or more kinds of input and
creates an output, that is of value to the customer/ typical processes include manufacturing, ordering, delivery
and invoicing. It will be seen that this way of looking at work is directly comparable to the systems approach.
Processes have 2 important characteristics i.e.
1. They have customer (internal or external)

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2. They cross organizational boundaries i.e. they occur across or between organizational sub-units.
One technique for identifying business processes is an organization is the value chain
proposed by porter. Processes are generally identified in terms of the beginning and end
points, interfaces and organizational units involved. Examples of process include
developing a new product, ordering goods form a supplier, creating a market plan and
processing and paying an insurance claim etc.

BPR has been, and is being, used by a number of organizations, e.g. the UK Treasury, Lloyds Bank, Ford Motor
Company and the New York Police Department, and many successes have been claimed for the approach. For
example, the New York Police Department claims that the substantial drop in crime in the 1990s was partly due
to the streamlining of the organization and the different approach to work which resulted from the use of BPR.

BPR seeks to rethink the process from scratch without regard to existing methods, structures and departments. It
is claimed that the re-engineering approach leads to numerous changes in the way work is done, how employees
behave and in the structures of the organization itself. Typical of these changes are:
• Individual jobs and tasks get combined with related jobs and tasks
• Jobs tend to become more multidimensional and comprise a range of tasks
• There is more emphasis on process teams rather than traditional functional departments.
• Empowerment of workers increases. More decisions are made by process teams, there is more flexibility
and less reliance on formal rules, there are fewer checks and controls.
• Work is performed where it is most sensible and efficient, i.e. normal boundaries and demarcations do
not apply.
• There needs to be more emphasis on education and understanding why the job is done rather than
merely basic training which concentrates mainly on how the job is done
• Organizational structures become flatter and less hierarchical.
• There are likely to be major differences in culture and attitudes, e.g. customers become much more
important, advancement will be based on ability, the focus for payment and performance will be based
on results measured in terms of value to the customer.
• Challenging traditional methods, structures, and ideas becomes a normal part of work.

Naturally enough, some of the more extravagant claims made for BPR have been challenged by other writers.
Coulson-Thomas, for example, thinks that much of what is termed BPR is only process simplification within
existing frameworks and is a cover for cost reduction and downsizing (i.e. reduction in staffing levels).

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The staffs that remain after BPR are pressurized and have to work much harder, other writers, such as Talwar,
think that much of BPR goes beyond the scope of work design and is more applicable to strategic management
and organizational change.
How Does BPR differ from TQM

Tengetal in 1994 stated that in the recent years increased attention to business
processes is largely due to the Total Quality Management.
Davenport observed that quality, specializes tend to focus on incremental change and
gradual improvement of processes, while proponent of re-engineering often seek radical
redesign and drastic improvement of processes.
TQM is a continuous process that refers to programs and initiatives that emphasis the
incremental improvement in work processes and outputs over an open ended period of
time. In contrast, re-engineering also known as business process re-design on process
innovation refers to the discrete initiatives that one intended to achieve radically
redesigned and improved work processes in a bounded time frame.

In 1993 Daveport contrasted the two i.e. TQM and BPK.

SUBJECT TQM improvement BPR Innovation

2. Level of change • Incremental • Radical
3. Starting point • An existing process • Clean slate (New
process)
4. Frequency of • One time or • One time
change continuous
5. Time required • Short • Long
6. Participation • Bottom-up • Top-Dower
7. Typical scope • Narrow and within • Broad and cross function
the functions
8. Risk • Moderate • High
9. Primary enabler • Statistical control • Information Technology
10. Type of change • Cultural • Cultural and structure

What Is The Relationship Between BPR And I.T?

I.T is a key enabler of BPR which can bring a radical change. Hammer in 1990
prescribes the use of I.T to challenge the assumptions inherent in the work processes
that have existed long before the advent of modern computer and communications

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argues that at the heart of re-engineering is the nation of discontinuous thinking or

recognizing and breaking away from outdated rules and fundamental assumption
underlying operations. These rules of work design are based on assumptions about
technology, people and organizational goals that no longer holds.
He suggests the following principles of re-engineering.
1. Organize a round outcome and not task.
2. Have those who use the output of the process perform the process.
3. Identify the information processing work into real work that produces information.
4. Treat geographically dispenses resources as though they were centralized.
5. Link parallel activities instead of interacting their results.
6. Put the decision point where the work is performed and build control into the
process.
7. Capture information once and at the source.

Daverport and Short (1990) argues that BPR requires taking a broader of view of both I.T
and business activities and of the relationship between them.
I.T should be viewed as more than an automating or mechanizing force to fundamentally
reshape the way business is done. I.T capabilities should therefore support business
processes and the business processes should be in terms of the capabilities I.T can
provide. It’s this that is referred to as the Broader, responsive view of I.T and BPR as the
new industrial reengineering.

CAPABILITY IMPACT /BENEFIT

1. Transactional capability I.T can transform unstructured processes
into structured ones.
2. Geographical capability I.T can transfer information rapidly and
easily across large distances making
processes independent of the geography
(Global networks).
3. Automation capability I.T can replace or reduce human labor in
a process.
4. Informational I.T can bring vast amount of information
into a process.
5. Sequential I.T can enable changes in the sequence of
tasks in a process often allowing multiple
tasks to be worked on simultaneously.
6. Knowledge and I.T allows capture and dissemination of
management knowledge and expertise to improve
processes.

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7. Tracking capability I.T allows detailed tracking of status,

inputs, outputs in processing e.g. in panel
delivery companies e.g. DHL, UPS, Fedex
etc.

Business process reengineering can be divided into two i.e.

1. Operational processes which relate to the customer or produce e.g. product
development, customer acquisition and manufacturing.
2. Management – This deal with obtaining and coordinating resources e.g.
performance, monitoring, assets, information and human resource management.

BPR Methodology:
The following is a five step approach to BPR:
1. Develop the business vision and process objectives.
2. Identify the processes to be re-designed.
3. Understand and measure the existing processes.
4. Identify the I.T. enabler.
5. Design and build a prototype of the new process.

(c) AUTOMATION

The role of internet, intranet and extranet to an organization

The internet is an international network of computers numbering 100s’ of 000’s of
private and public networks. The following functions are available on the internet.

FUNCTION DESCRIPTION
1. To communicate and This involves sending of E-mails
collaborate messages, transmission of documents
and the participation of electronic
conferences.
2. Access information The searching for documents and
databases and the reaching of electronic
brochures, manuals, book and adverts
and the access of library catalogues
3. Participate in One can joint interactive discussion
discussions groups and transmits voices
electronically.
4. Supply information This involves the transfer of computer
files, computer program, graphics,

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animations and video games.

5. Find entertainment Plant interactive video games and watch
movies
6. Exchange business A company can advertise, sell and
transactions purchase goods and services.

An intranet is an internal network based on the internet W.W.W standards. The principle
difference between the web and the intranet is that whereas the web is open to
everyone, the intranet is private and protected from the public using firewalls.
An extranet is a private intranet that is accessible to selected outsiders. Its used to link
organizations with customers, business partners and providers information or product
availability, pricing, shipment data and E.D.I ad E.F.T.

Benefits of internet to organization

1. Connectivity and Global Reach

The value of the internet lies on the ability to easily and inexpressively connect so
many people from so many places over the globe. This coupled with the ease of
use, help customers to link directly to suppliers and business partners etc. They
can also trader and advertise across the bounder.

2. Reduced communication cost:-

Organizations are able to reduce on their mailing, telephone and faxing charges by
half.

3. Low transaction cost

Electronic transactions are much cheaper than paper based ones.

4. Reduced Agency cost

Producers can coordinate directly with the consumer have reducing the cost for
agencies or the so called middlemen.

5. Interactivity, flexibility and customization

Internet tools can be used to create interactive applications e.g. the use of E-mails
and electronic discussion groups to create on going dialogues with the customers.

6. Accelerated distribution of knowledge

Web browser software provides a universal interact of accessing information
resources. It also helps in interactive marketing which uses the web to hold the
customer attention or to capture information about their tastes and interest e.g.

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Reebok International Customer services and support can be done online e.g. The Del
Computers use a Del newsgroup on the net to handle customers complains.

CASE STUDY:
• The internet has transformed the way many organizations work. This is
particular so with regard to business. The internet has been able to save
businesses money and also non-profit making bodies like charities.
• For large corporations the internet offers the chance to cut overheads by moving
various co-functions online such as recruitment, press relations, share-holders
information, educational resources and technical support online. At the other end
of the scale virtual organization can eliminate the used for expensive office space
and reduce the reliance on paper work.
• Service companies such as accountants and legal firms are creating virtual offices
with customers and staffs linked by the internet. For all organization online
procurement is possibly a way to save all large amount of money.
• Microsoft says its internet based procurement system saver its almost $3,000,000
a year handling over 250,000 transactions. It uses this online volume to negotiate
favorable process with suppliers of office equipment, books, computer and catering
services.
• The online system cuts administrative costs from $60 to $5 an order.
• Another US company Chryster i.e. a car maker and says that it saver 1.3M dollars a
year by not having to key in invoices previously send in by suppliers not using the
EDI but who now use the internet. The company is also getting components from
supplier’s up to 11 days faster than before. The reduction is cycle time reduces the
cost per transaction from 28 dollars to 7 dollars.
• One form of extranet is the courier tracking system operated by the federal
express (Fedex). Supermarket claim call Sainsbury is creating an extranet so flat
supplier can contact key personnel online, access information about stock, price
changes and sales forecast. And also find out how their products are selling.
• Many manufacturers like Xerox and BMW provide extensive produce details that
generate sales leads and offline sales via distributors. The internet is now the main
head generator for Toyota. Its website has overtaken Toyota’s 800 toll free
numbers in the U.S as its best source of lead.

Challenges to the management (ORGANIZATION)

1. Security and privacy of the company and the individual.
2. Legal issues of the role of electronic signatures and the application of copyright
laws to electronically copied documents.
3. Technology handles e.g. Bandwidth where on ISP has been unable to keep on
with the demand.

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4. Internet based transactions aren’t recognized by law i.e. There is no legal backing.

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MANAGEMENT, CONCEPTS (Theory)

Management is the process of providing an organizational environment in which
individuals work to contribute to the overall goals of the organization.
The main objective of management is the effective and efficiencies transformation of
resources such as capital, labour, raw materials and information into profitable and
marketable products.
The way organizations work today is attributed by the contributions made by
management theorists or thinkers in what is referred to as the school of thoughts.

School of thought Names of contributors and Contribution for management theory

principle dates
1. Scientific management Frederick Taylor (1911) How to maximize productivity through
Hendry Gantt efficient workflows by letting and
Trank & Lillian Gibreth controlling measurable performance
standards.
2. Administrative Henry Fayol (1916) Recognition of management as a scientific
management discipline whereby the introduction of
divisions of work according to
specialization with direct relationship of
responsibility to authority, degree of
centralization and authority based on
organization contingency plans and the
claim of authority within the organization.
3. Behavioral and social Hugo Miinsterberg (1913) The recognition of social groups in people
approach Ecton Mayo (1933) and psychological satisfaction of needs.
Management via interaction of motives,
ideas and action of individuals.
4. Decision making Herbert Simon (1960) Decision making as a fundamental
approach managerial authority. The use of
quantitative models to support decision
making. Recognition that people have
limited national capabilities thus system
must be structured to support decision
making.

Henry Fayol and other writers classified the functions of a manager as follows:-
2. Planning
3. Organizing
4. Co-coordinating

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5. Decision making
6. Controlling
7. Leading
8. Communicating
9. Motivating
10. Staffing

1. Planning
This is a future based activity. It involves making decisions about organizational aims
or objectives. How the plan is to be carried out, with what kind of resources, what
policies are to be used and finally the methods of measuring the results.
It must be carried out against a background of external environment and the
organizational resources. I may be termed as a long, medium or short term.

2. Controlling
A method of measuring the systems progress against a previously set standard and
correcting any deviations that occur during the time span of the system. It requires
that a measurable standard is set at the stat of system and a means of measuring
progress against the standard is set up that would be operating during the time
span of the system.
It’s also a means whereby corrective action can be taken as appropriate.

3. Organizing
This may involve structuring an organization into sections, departments and divisions
and allocating tasks to each of them and delegating authority and responsibility. It’s
the coordination of human and material resources to carry out the work.
Organizing requires appropriate communicating channels to be set up.

4. Leading
This is the ability of a manager to influence human resources to follow instruction or
to do a job. A manager must understand the task, the term and the individual to be
an effective leader. The tasks and functions include; the planning of the tasks,
allocation of responsibility and setting standards of performance.
Team functions are directed, towards team building, motivation of the team
members, communication and discipline.
Individual maintenance functions are directed towards training, counseling,
motivation and development.

5. Communication

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This is the comprehensive transmission of managers from a source to a destination

with a view of causing some reaction or sharing the meaning. The manager is
usually the intermediary between chief executive and rest of the staff.

6. Motivation
Influence on the human resource to strive willingness inorder to achieve the
organization’s objectives. Motivation can be materials wise or via intangible elements
such as recognition or a flexible working environment.

7. Staffing
This is the selection, training and appraisal of the human resources to work for an
organization. The management must know how to develop the staff.

8. Decision Making
This is selection of the best course of action among the several alternatives available.

Managerial Roles
These are the expectations of the activities that managers should perform in an
organization. They can be classified as follows:-
1. Interpersonal roles
Managers acts as figure heads for the organization when they represent their
company to the outside world and perform symbolic duties such as giving out
employees awards. They also act as leaders attempting to motivate or to council
and support subordinate.
The manager also acts as liaison between various levels of the organization

2. Information roles
Managers acts as the nerve centers of the organization receiving the most
concrete and up-to-date information and distributing it. As dissemination and
spokesman of the organization they are supposed by management information
systems, mail and office system.

3. Decisional roles
Managers acts as the entrepreneurs by initiating view activities. They handle
disturbances in the organization. They allocate resources and negotiate conflicts
and mediate between conflicting groups in the organization. There is no single
theory of management that is anniversary accepted, common theories include:-
i) The universal approach

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It states that the administration of all the organization require the same
rational approach. It assumes there is a core management process that
remains the same across the organization.
It emphasis on the division of labor, chain of command and authority.

ii) Operational approach

This is a scientific approach which conducts a business by establishing
standards gained through systematic observation, experiment or reason. It
centers on the standardization of work, time and task study, systematic
selection and training of workers.

iii) Behavioral approach

It advocates that successful management depends largely on one’s ability
to understand and work with people who have a variety of backgrounds,
needs perceptions and aspirations.
It emphasis that people are key to productivity and that technology, work
rules and standards don’t guarantee good job performance.

iv) Systems approach

This assumes that the whole is greater than the sums of the individual tasks
(synergy). The manager must not become pre-occupied with one aspect of
the organizational management while ignoring other internal and external
realities.

v) Contingency Approach
Emphasis or the choice of an alternative cause of action depending on the
situation at hand. Management should be flexible and streamlined to adopt
quickly to the change.
NB: A manager can use any of the above approaches.

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CHAPTER 10

INFORMATION SYSTEM ETHICS

Ethics refers to the principles of rights and wrong that can be used by individuals acting
as free moral agents to make choices to guide their behavior. Information systems raise
new ethical questions for both individuals and society because they create opportunities
for intense social change and they threaten existing distribution of power, money, rights
and obligations. These issues have 5 dimensions.
1. Information rights and obligations – what rights do individuals and organization
posses with respect to information about themselves?
What can they protect?
What obligation do individuals and organization have a conceiving this
information?
2. Property rights – How will traditional property rights be protected in a digital
society in which trading and accounting for ownership is difficult and ignoring
such property rights is it so easy.
3. Accountability and control – who will be held responsible, accountable and reliable
for the harm done to individuals and their property rights.
4. System quality – what standards of data and system quality should we demand to
protect the individual rights and the safety of the society.
5. Quality of life – what values should be preserved in information and knowledge
based society?
What institution should we protect from violation?
What actual values and practices are supported by the new technology?

Key technology trends that raise ethical issues

1. The doubling of computer power every 18 months has made it possible for most
organizations to utilize information systems for the core production processes.
Leading to an increase in dependency on systems, vulnerability to system errors
and poor data quality.
There are no social rules and laws adjusted to this dependency and standards for
ensuring the accuracy and reliability of information systems.
2. Advance in data storage techniques and rapidly declining storage costs has been
responsible for the multiplication of databases e.g. employees, customer and
potential customer maintained by private and public organization.
These advances make routine violation of individual’s privacy both cheap and
effective.
3. Advances in determining techniques for large databases, organization collect and
combine information about a customer from credit card purchase, telephone calls,

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banking records and police records. If properly mine this can reveal credit
information, living habits, tastes, association and political interests.
4. Advances in networking – this greatly reduces the cost of moving and accessing
large quantities of data and open the possibility of mining large pools of data
remotely using small desktop machines permitting and invasion of privacy.
The global digital superhighway communication network posse’s social and ethical
concerns such as:-
i) Who will account for the flow of information over the networks?
ii) Will you be able to trace information collected about you?
iii) What will these networks do to the traditional relationships, families, work
and leisure?

Ethical Principles:-
1) The golden rule – do unto other as you would have them do unto you.
2) Kant’s categorical imperative – if an action is not right for everyone to take then it’s
not right for anyone to take.
3) Descarte’s rule of change – if an action can’t be taken repeatedly, then it’s not right
to be taken at any time.
4) Utilization principle – take the action that achieves the higher or greater value.
5) Risks aversion principle – take the action that products the lease lewd on the least
potential cost.
6) No free lunch – virtually all tangible and intangible objects are owned by someone
unless there is a specific declaration otherwise.

Professional Codes of Ethics (CONDUCT)

These are special rights and obligations take on by professional due to their special
claims of knowledge and wisdom. It also entails respect e.g. institute for the
management of information system (IMIS), Association of Business Executive (ABE),
ICPAK, Law Society of Kenya (LSK) and Association of Computer Machinery Codes
(ACMC).
These promise the professionals to regulate themselves in the general interest of the
society e.g. avoiding harm to other, honoring property rights including intellectual
property and respecting privacy.
They also determine entrance qualifications and competence consider an e.g. British
Computer Society (BSC) which was formed in 1957 and become a full member of
England Engineering council in 1990. It’s a professional body of computer practitioners in
the United Kingdom and has more than 34 members.
The society is concerned with development of computing and its effective applications.

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It has assumed responsibilities for education and training for public awareness and for
standards of quality and professionalism.
Its role is to set the professional standards of competence conduct and ethical practice in
the U.K. It’s an authoritative voice to the society government and industry or all aspects
of IS.
It influences legislation on data registration, safety, copyright and product liability. The
society has 3 degrees of members i.e associate, members and fellow.
Members at the 3 levels are accepted according to their qualification.

Some Real World Ethical Dilemma

1. Continental incorporated developed a human resource Db that was able to ‘red
flag’ an employee who was almost retirement age, where the red flag went up the
management for the employee even in delay.

2. AT & T Telephone Company uses technology to monitor employees’ responses to

customer. It hopes to eliminate 3000 to 6000 employees by identifying speech that
is unpractical and summary.

3. E-mail-privacy at Epson – in 1990 an employee of Epson sued the company for

$75,000,000 for unlawful termination. She was fired because of questioning the
company’s policy of monitoring and printing of employees.

4. Mails messages – many firms claim the right to open mail because they own the
facility. They are intended for the business only and create this facility for a
business purpose.

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Other ethical issues concerning technology include;

1. Employment – is have been known to lead to loss of jobs and hence a decline in
quality of life.
2. Equity Access and increasing ratio and social classes – Does everyone have an equal
opportunity to participate in the digital age? Will the gaps increase or reduce.

High
Factory Strategic

Low

Support
Turnaround
Any of the organization in existence has to fall in any of the above four quadrants.
1. Strategic quadrant – information systems planning is critical to the current and
future performance of the firm. I.S planning must be closely linked to corporate
planning.
2. Turn-round is – information systems planning is very importance to the future
performance of the firm, without I.S planning, performance will suffer significantly
in the long-run I.S planning must be closely linked to corporate planning.
3. Factory – I.S planning is needed for the information systems activity to be
coordinated and to run smoothly. It’s important to the current company
performance, but it’s not expressed to be a critical factor in the future.
4. Support – I.S planning is still needed for the I.S activity to be coordinated and to
run smoothly. It’s not critical to the current company performance and is very
unlikely to be of strategic importance in the future.

Example:
1. Support – this could be an organization that has developed a system to automate
some of the clerical procedures and it has no intention of investing in I.T in the
near future.
2. Factory – this could be an organization that has developed a network which is quite
useful in day-to-day running of company activities and has no intention further in
I.T.
3. Turnaround – are organizations that one currently not using I.T. for nay strategic
use but there future survival will involve I.T. a lot, such as a university that is
contemplating of having a virtual university i.e. African Virtual University (A.V.U).

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4. Strategic – e.g a Bank that has invested in ATMs and any future survival in
competing effectively is alighted to I.T. e.g. loan portfolio management.

Maslow qualified human wants into a hierarchy of needs. Each lower want or need must
be stratified before a worker will seek rewards at the next higher level. Consider the
levels starting with the most basic:-
1. Physiological needs – food, clothing and shelter. For the worker this means money.
Many workers are willing to work at relatively tedious jobs or at higher production
rates given sufficient monetary incentives.
2. Safety or security needs – for the worker this means overall job security. Also at
the work site, improving the safety environment will improve the working climate.
3. Social needs – worker seek “belonging” interms of work, this could mean having
friendly co-workers, comfortable interaction with management and being able to
participate in company’s committees.
4. Self –esteem – workers strive for competence, desire some respect and seek to
satisfy their egos. This could be provided by making the work more challenging,
adding more responsibility and providing greater variety.
5. Self-fulfillment – when all other needs are fulfilled people become satisfied with
life.

Computer crime

Information system control, threats to security, privacy and confidentiality in MIS

operations
Electronic funds transfer systems, ICU (Intensive Care Unit) and air traffic control
systems depend on computers to function reliably and it’s estimated that they can’t
survive a total failure of their information systems processing capacity for longer than a
day or two.
The relationship between threats to information systems control can be illustrated as
follows:-

Identify the threats Some of the threats are due to human error, computer abuse,
natural and political disaster, hardware and software failure

Establish is control Ensure security, privacy and confidentiality via general and
application controls.

122 | P a g e Check effectiveness and efficiency of systemJ s. GanAdTcAonCtrHoAls with

Perform regular audit of 1S
financial and operational bodies.

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Classes of threats
1. Human error – involves wrong input data, errors in program development or
maintenance and operator errors e.g. mislabeling the tapes.
2. Natural and political disasters – includes earthquakes, typhoons, tornados and
hurricanes.
3. Failure to hardware and software – e.g. network and power failures and software
maintenance.
4. Computer abuse and crime – using a computer to steal, sabotaging the system and
authorized access to a modification of data (hacking). Computer crime is any
illegal act in which a computer is used as a primary e.g. impersonification i.e.
giving access to a system by identifying oneself as one person and therefore
enjoys privileges of the legitimate user.

TROJAN HORSE method i.e. conspiring within an authorized programme are routine of
actions causing unauthorized actions.
LOGIC BOMB i.e. programme who placed a logic bomb in his companies personnel
system such that should his name be upset from the personal file the entire file is
erased.
• Computer viruses introduced deliberately.
• Data diddling i.e. changing of data during or before input often to change the
contents of the database.
• Salami technique – this is diverting small amounts from large number of accounts
maintained by a system.
• Super-zapping – using a system program that can by pass regular system controls
to perform unauthorized act e.g. the IBM super-zap utility.
Super-zaps are provided to handle emergencies in systems such as restoring
systems operations after a multifunction that can’t be handled with a regular
recovery method.
• Scavenging – its unauthorized access to information by searching via the residue
after the job has been run on the computer e.g. searching the waste paper basket
for printouts etc.
• Wire tapping or carves-dropping
• Spoofing – collecting of confidential information from unsuspecting visitors to
the website they visit.
Having defined controls as a set of policies, procedures and technological
measures that are put together an error or an attack of commuter systems from

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taking place detect the violation and correct the exceptional situation. These
controls can be categorized into general or application controls.

General controls:
1. Administrative – include separation of duties, constant supervision of staff,
thorough screening of new employees, published procedures and standards. These
can also include disaster recovery planning or contingency planning.
2. System development and maintenance control – systems should be secure and
auditable. Documentation should be maintained and should specify changes
made to the system.
3. Operational controls – involve controlling access to system, maintenance of
computer equipment and storage and the day to day running of the company
activities.
4. Physical protection of data centres – e.g. installation of air conditioning
equipments, fire extinguishers and UPS (uninterruptable power supply).
5. Controlling access to computer system and information e.g. identification,
authentification and encryption. This may use the user’s knowledge e.g. the name,
account number or password i.e. a smart card with a microprocessor or a biometric
control. This is the using of bodily features such as fingerprints, hand geometry
(chiromancy) , retrieval scanning and the signature.
6. Control as a last result e.g. adequate insurance for the residual risk or a disaster
recovery plan.

Application controls
Implemented specifically for a particular information system e.g. a payroll system,
account payable or order processing system. They include;
1. Input control – this is to ensure accuracy, completeness and validation of input.
2. Processing control – e.g. cross-checking two computation which can also include
reasonable checks and rounding off.
3. Database controls – these include backups, recovery, file handling and
authorization.
4. Communication controls – including encrypting and the use of digital signatures
which should also be encrypted.
5. Output controls .e.g. scheduling, handling and distribution.

Auditing of Information Systems

Auditing is the process of verifying organizations accounting records and financial
statements. However, this is not possible today without a thorough audit of the
information systems which are the primary tools for managing these records. Information
systems are audited by external auditors who test the accuracy and the truth of the

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corporate financial statements and by internal auditors who work for the organization
itself.
Internal auditors also perform operational auditors to evaluate the effectiveness and
efficiency of MIS operations.
The principle behind the auditability of information systems is that every transactions
must reliably be traceable to the aggregate figures that it affects and each aggregate
figure must be traceable back to the transactions which gives rise to it i.e. An audit trail
must exist making it possible to trace the origin and verify the processing. Transactions
logs provides basic audit trail.

Conducting MIS Audit

MIS auditors generally evaluate the controls on the assumption that if a system has
adequate controls that are consistently applied the information produced by these
systems is also reliable. Audit can both be scheduled or unscheduled. The process is as
follows;-
1. Study the I.S. and its documentation, inputs and outputs then interview the key
users and the M.I.S personnel. Study both the general and the application controls.
2. Select a sample of transactions processed by the system and trace their
processing from the original document onto the totals they affect. Replicate the
processing done by the system and compare it with the result. This is called
compliance testing.
3. Validate totals contained in financial records. This is known as substantive testing.
The extent of this depends on the compliance results. If controls were operative
their only a limited substantive testing would be required.
4. Conclude the audit by reporting the findings to the corporate management with a
detailed statement of all the controls deficiencies discovered. The use of computer
Aided Auditing Techniques (CAAT) can be applied here.

Why is it necessary to conduct an I.S Audit?

1. Give an assurance of the system reliability e.g. whether the computations are
accurate and if there is any likelihood of failure.
2. To search for efficient utilization of computer systems. This confirms that the
invested funds produce adequate results i.e. no wastage of resources.
3. Prevention of computer crime. This detects destructive activities such as fraud and
computer viruses.
4. Protection of privacy – administrative bodies collect process and store information
on individual using computer. Auditing identifies points at which private
information may be leaking.

Types of IS audit

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1. System development audits: Audit staff advices members of pvy development team
to ensure that controls are embedded in the original design.
2. Operational audits – they are periodically conducted on an I.S to ensure that proper
system controls exists and that they are being followed. They involve checking
input data, processing and output.
3. Application audits – meant to validate the integrity of an I.S. It involves identifying
all the controls that govern individuals I.S and access their effectiveness. The
auditor needs a thorough understanding of the operations, physical facilities,
telecommunication control systems, data security objectives, personnel,
organizational structure and manual procedures and individual applications.

Disaster recovery planning /contingency planning

A disaster recovery plan specifies how a company will maintain. The information system
necessary in the event of a disaster.
A fire or an explosion in the data centre can bring operations to a standstill. In addition a
disaster plan may be required by a regulatory agency or for the purposes of obtaining an
insurance cover;-

Importance of contingency planning

1. It enables a company to take a closer look and identify any threats that may
hamper its operations.
2. It enables an enterprise to be adequately prepared in the eventuality of realization
of the risks.
3. It enables the critical operations to continue in case of a disaster.
4. It eliminates the confusion, uncertainty and panic that results whenever a disaster
happens by clearly stating the actions to be undertaken in the event of such a
disaster.
5. It facilitates the faster recovery from the disaster thereby reducing the impact.

Steps in drawing a contingency plan

1. Resolve the basic planning issues .e.g. the scope of the plan.
2. Gather important information e.g. the cost of the subject and the case of
replacement.
3. Conduct a situation assessment e.g. identity open risks and potential disaster.
4. Identity the planning constraints and limitations.
5. Identify alternative sources of active and select the optimal cause
6. Compile the plan.
7. Conduct a drill for the plan.

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A disaster recovery plan has 4 major elements:-

1. An emergency plan – it specifies in what situations a disaster is to be declared and
what actions are to be taken by the various employees.
2. A back-up plan – this is a principle component which specified how information
processing would be carried out during an emergency. It details how backed up
computer disks or tapes are to be maintained and specifies the facility where they
can be run on a very short time notice. These arrangements include;-
(i) Reciprocal arrangement – compares with similar hardware configurations
agree with one another to permit short term sharing of the problem by
transferring the affected system to the other company before the situation is
rectified. Should a disaster occur both companies are forced to reduce their
levels of data processing to support only the critical operations.
Although the method is inexpensive critical operations of the two
organizations may be too much for a single one to handle.
It’s also possible for a disaster to strive both companies together.
(ii) Cold site arrangements – This is a facility that can house a mainframe
computer system including environmental control, electrical services and
telecommunication services.
A company may contract with a disaster recovery company to provide a cold
site in cases of disaster or may rent, lease, or purchase suitable space.
(iii) Hot site arrangement – this site contains a complete date centre including
a working mainframe system compatible with the one that is backing up.
The strategy is expensive but minimizes the down time e.g. a computer
bureau. However the company must be aware that a similar disaster can
affect several companies at the same time.
(iv) Back up facilities – A parallel facility where one company has more than
one data centre. This is usually an arrangement of real-time systems. The
parallel facility has duplicated software and hardware and the database is
updated as an ongoing process. This arrangement is the most expensive
but would be the best approach.

3. Test plan – This includes drills and practices of what would happen in cases of
emergency. It tests the reliability of the back-up plans.

4. Recovery plan – This includes arrangement on purchasing hardware and software to

restore the original company. This involves insurance arrangements, loans etc.

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