Managing the information resource

Advanced Diploma in Business ManagementMANAGING THE INFORMATION RESOURCE Contents 1 The Role of Traditional Information Systems in Today's Business Office Automation Systems and Transact

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Advanced Diploma in Business Management

MANAGING THE INFORMATION RESOURCE

Contents

1 The Role of Traditional Information Systems in Today's Business

Office Automation Systems and Transaction Processing Systems 44Different Information Systems and Management Levels 45

4 The Role and Function of Information Systems in Maintaining

Competitive Advantage

57

Information Flow Through Business Infrastructures 61Influences on the Information System Infrastructure 63Information System Influences on Corporate Structures 68Management Structures of the Information System 71Implications for the Design and Understanding of Information Systems 74

The Impact of IT in the Wider Business Environment 77

Unit Title Page

8 Basic File Organisation Methods and Database Management 157

9 System Vulnerability, Security and Control 177

(Continued over)

Access to the Management Information System 18

The Role of Traditional Information Systems in Today's Business Environment 3

INTRODUCTION

The main purpose of this unit of the course is to introduce you to the concept of informationand its importance in the modern business environment The unit will also examine thetraditional role of Information Systems in today's business environment

In summary we shall examine the following:

 The nature of Information

 Information Systems

 How Networks and the Internet have enhanced the usefulness of Information

 Other factors besides these that have expanded the usefulness of Information

 New organisational styles and working practices due to Information

Objectives of the Unit

After studying this unit, you should be able to:

 Recognise the value to organisations of information as a resource and identify theprinciple reasons for its increasing importance

 Discuss the concept of an Information System

 Describe the role of Information Systems in transforming organisations and businessenterprise

 Describe the role of Network Systems within an organisation

All of us have an intuitive knowledge of information and we are all very aware that this isoften called "The Information Age" But an intuitive knowledge is not precise enough when

we come to implement a formal system of information into the organisational and businessenvironment

We will then take a broad look at the principal factors behind the huge growth in information

in modern times We do not need to go back very far historically, as the information

explosion has only been possible with the development of computers These did not appear

in the commercial world until the late 1950s and through the 1960s Even then, it was notuntil the 1970s that most businesses realised their importance and the 1980s before

networks were fully developed Networks were connected to other networks and the Internetwas born and then, in 1995, the World Wide Web was developed and the whole world

embraced information

Without doubt, we are living through a full Information Revolution which is every bit as

significant and pervasive as the Industrial Revolution of the 19th century Modern society isinformation-driven Modern business is information-driven and as individuals we are

information-driven

We do not have far to look for examples Society responds to the fluctuations of the markets

on a daily basis and demands up-to-the-minute information on interest rates, exchange rates,cost of living indexes, etc Business requires information on competitors, sales returns, profitmargins, etc Individuals require information on products and services, opportunities, etc.And each responds to national or international appeals from relief agencies and

governments

The world would come to a halt without information All around us are organisations

providing us with information The development of the Internet and World Wide Web hasincreased the supply of information a million times more As much as anyone else,

managers receive all this information as well as that which is generated within their owncorporate systems

Not only are we bombarded with unsolicited information but also, as more becomes available

to us, more is demanded by us For instance, a manager may ask for information on thestock held by the organisation On receiving it, he then asks for the comparable figures overthe last few accounting periods When the manager gets these, he might ask for the

projected figures for the next few periods, as well as for the marketing figures justifying theprojections, for national statistics supporting the marketing figures and so on

It is now quite impossible for managers of any kind to avoid information It has become theprincipal resource of most organisations

The subject of this course is the Management of Information.

As a student of information your curiosity should have asked:

 Why were those particular numbers chosen?

 Is there a familiar pattern or format?

 What do they mean?

My answers, in order, would be:

 No particular reason as another six digits could equally have been chosen

 Yes

 I'm not saying at this stage

In other words, I know what I intend them to mean but at this stage you do not

Even if you have made a guess you cannot be sure

As the numbers stand they do not tell us anything with confidence

They do not convey any meaning to us and so they do not convey any information to us

We have arrived at a definition of information:

could be another representation of the same information

Let us pause and consider these representations:

 They tell us nothing with certainty,

 They are symbolic,

 They are easily stored in a computer

The Role of Traditional Information Systems in Today's Business Environment 5

We call such representations data.

A Definition of Data

Data is the encoded representation of information.

It is commonly said that whilst data is the raw material, information is the finished product.There is one further aspect that we must consider, as this understanding is too simple foranyone in the real world

Examining the two data representations:

100 100

baa baa

We can think of each as a further encoding of the other In other words they are the samething

The possible meanings conveyed to us could include:

 The number one hundred thousand and one hundred,

 A date But is it the 10th January 2000, or the 1st October 2000 as expressed in theNorth American style?

 The binary equivalent of the number we normally give as 36 This is the numberingsystem used inside computers

 The sound made by a sheep

 Musical notes in series as for the tune "Three Blind Mice"

 Any others you may have thought of

To choose the correct option from these we need to know the context in which the data is

presented Each of the options can be correct within its own separate context

We can now say that to understand a piece of information we need to interpret the datarepresentation within a previously understood context

This has a knock-on effect on our understanding of information, however

For an example we will further consider option number 3 above of the binary numberingsystem used inside computers If you are one of the many who do not know what binarynumbers means, then the data representation is still just data to you No information isconveyed We can say that what is information to one is usually just data to another So allrepresentations are both data and information at the same time and it depends upon a

context and further understanding to turn data into information

We will consider another example:

236 212 263 200 189 220

In the above form, the numbers could have many different meanings

But if we add £ in front of each number then we can see they represent monetary values:

April £200

And we can now see that the values illustrate a trend.

By further processing we gain more information For example, the values add up to £1,320

As a half-yearly figure this is not very much We are then led on to query the context furtherand we may well find that the values are in units of 1,000, so that the half-yearly figure is

£1,320,000

We can make further analysis and say that:

 The monthly average is £220 thousand

 In only two of the months was the average exceeded

 The deviation from the average was £31,000 below to £43,000 above

Once we have a full understanding of the context of the data, we can extract all kinds ofinformation by carrying out mathematical and statistical calculations, comparing differentvalues, analysing trends, sampling and summarising

The information will now be of considerable use within the proper environment This nowseems a good point at which to set out what is meant by "useful information" After all, for allthe analysis we made of the above money values, we still do not have a full context in which

to place them and so turn understandable values into useful values

B THE ATTRIBUTES OF USEFUL INFORMATION

Information has a purpose, i.e someone wants it for a specific reason, and because of this it

must have certain important attributes if it is to be useful

1 It must be relevant to its purpose, which usually means that any information not

relevant to the specific time period, group of customers etc should not be included

2 It must be sufficiently accurate for its purpose This does not always mean 100%

accurate For example, costs can seldom be accurately determined until after the end

of the period in which they are incurred For management reporting it is often better tohave an idea of whether costs are rising, falling or steady as early as possible in theperiod, even if it is not completely accurate

A high level of accuracy is usually achieved only at a high cost Managers must bemade aware of the cost impact if they specify very accurate information needs Oftenslightly less accurate but sufficient information can be provided at a greatly reducedcost and it may even be more up-to-date

Note here the difference between accuracy and precision Sales figures could becomputed to the nearest penny, pound or thousand pounds – that is, calculated todifferent levels of precision However, if the data has been incorrectly entered, or thecalculations carried out incorrectly, the resulting total will be inaccurate (wrong)

Another type of inaccuracy is when approximate sales figures are collected because itwould be much later in the month before exact figures were available It is here that acompromise between accuracy and timeliness has to be made

This compromise is important and we can think of a further example involving

quotations for a proposed new product Imagine the situation where quotations areurgently needed and yet 100% of supporting data is not yet known In such cases, a5% error margin may well be acceptable as a compromise in facilitating the progress of

The Role of Traditional Information Systems in Today's Business Environment 7

3 Is extra information always useful? Too much information is not necessarily useful i.e.

"the more detail, the more information" is not necessarily true For instance, if headoffice was provided with daily totals by each store, the information would simply be amass of data requiring further processing before becoming useful Therefore, although

a mass of data is needed from which to draw information, the detail being passed tomanagers should be no more than they require Users should be provided with theminimum of information that will satisfy their needs This is quite easy to achieve withcomputers, and information reports can be formatted according to individual userrequirements

4 It must be timely Again, this relates to its purpose and does not necessarily mean it

must be completely up-to-date Most financial data analysis (balance sheet and profitand loss) use "end of month" figures Although they are not completely up-to-date theycan be compared with figures prepared on the same basis for the previous month,quarter, year etc

The idea that information should be available instantly is possibly appropriate at

operating level, where the time-steps can be very short; for example, spoilage rateinformation on a production line needs to be readily available in order to check

immediately on any deficiency as it arises At managerial level, however, there isusually a longer thinking and decision time available, and so the need for immediateinformation is not necessarily valid

The aim must be to provide timely information – that is, information at the time it isrequired We can therefore say that information must be provided within a time scalethat allows it to be used effectively by managers

5 It must be verifiable Essentially this just means that the information must be

checkable in some way The most popular method of verifying any information is toobtain confirmation from a different source For instance, few of us will rely solely onpublished timetables for train and air services After checking the timetables we aremost likely to confirm the information obtained with a phone call to the company oragency In the same way, information about our trading environment should always beverified from more than one source

6 Information must be presented to the right person and using the right channel.

Senior managers want an overall picture of what is happening without having to askcomplicated questions Head office staff are more likely to ask questions to find outwhy certain things are happening

7 It must also be well presented, which depends largely on the audience Information

for senior management usually has to be summarised, often making use of graphs andcharts Unexpected figures may have to be highlighted Lower levels of managementusually require a greater level of detail, and presenting information as a simple list offigures is more useful for staff and supervisory managers

8 The cost of producing information must not be greater than the benefit it gives.

This is particularly true of control information, where the value of preventing somethinghappening must be weighed against the cost of producing the information to prevent it,unless, of course, it is safety information in which case cost of collection is not a

relevant issue

C QUALITY INFORMATION

We are now in a position to consider what is meant by the phrase "Quality Information".

But we must beware, as this is a very slippery subject We have only to recall the old saying,

"there is no single absolute truth." In many cases, what is truth to me may be nonsense to

you The best resources for a medical researcher are useless to the school student and viceversa.

Whilst we have spent the last few pages investigating "information", the other half of ourterm, "quality" is a much more complicated term than it at first appears Dictionary definitionsare usually inadequate in helping us understand the concept It seems that every qualityexpert defines quality is a different way This is because there are a variety of perspectivesthat can be taken into account when defining quality There is the customer's perspective,the seller's perspective and the manufacturer's specification-based perspective And theseare just a few examples from a manufacturing industry perspective Service industries have

a completely different perspective and national and local government yet another altogether

We must begin by asking if there are commonalties among these perspectives? Is any one

"more correct" than the others? Is one quality expert "right" and the others "wrong"? Qualityprofessionals constantly debate this question

One modern definition of quality relies upon "fitness for intended use" This basically saysthat quality is "meeting or exceeding customer expectations" Another makes the point thatthe customer's definition of quality is the only one that matters So, who is the customer?

We will stop at this point as clearly the questions go on and on And I believe we have gonefar enough to convince you that any definition of quality must be very subjective

However, there are hallmarks of what is consistently "good" information These most basicrequirements are that the information will be:

 Relevant, which means it is pertinent to the receiver, who will then operate more

effectively with the information than without it

 Reliable, which means that the information is timely, accurate and verifiable.

 Robust, which means that the information will stand the test of time and failures of

handling, whether human, system or organisational

In addition if information is to be classified as "quality information" it must have:

 Objectivity in that the information is presented in a manner free from propaganda or

misinformation

 Completeness in that the information is a complete, not a partial picture of the subject.

 Pluralism, which means that all aspects of the information are given and it is not

restricted to a particular viewpoint

D INFORMATION PRESENTATION

Number 7 in our list of information attributes said that information "must also be well

presented, which depends largely on the audience" Put simply, this means that the recipient

of the information must understand the information and that the information should be

presented in a way that aids such understanding

Of course, as we saw at the beginning of this unit, it is facts that convey information

Therefore, these facts should be organised and presented in an understandable and effectiveway The following are some examples:

 Spatially – by laying them out in a particular readily understood style, e.g names and

addresses are traditionally set out in a series of separate lines Pre-printed forms areoften used to ensure a defined and understood style is adhered to If the form is welldesigned then any information on the form that has to be transcribed into a computerwill be in a prominent position with the individual characters clearly set out, typically inlittle boxes

The Role of Traditional Information Systems in Today's Business Environment 9

 Logically – by presenting them in a logical sequence, e.g in order of magnitude or

date, as with our previous money values which were set out vertically in month order Itwould have been just as correct to have presented them alphabetically:

However most recipients do not as readily understand this as it is unusual

 Analytically – by breaking up the facts into groups, e.g listing the total staff costs for a

month under the headings:

Department

Basic Pay

Overtime Pay

Employer's National Insurance Contributions

Employer's Company Pension Scheme Contributions

 Summarily – by joining or abridging the facts, e.g a total is an abridgement of the

information

 Graphically – by drawing pictures from the facts, e.g graphs, pie charts, maps A

column graph of our money values appears in an easily understood style

E BUSINESS INFORMATION

Some Current Business Information Issues

Today, businesses face increasingly complex markets, customers and suppliers, to saynothing of the international competitive pressures they also face In such an environment,senior managers must react quickly and so must have focused, high-value information toimprove the quality of their decision-making and so enhance the performance of their

business The information provided must help the manager formulate and review strategy inaddition to monitoring ongoing performance Although this may seem self evident, recentstudies have shown that the information needs of managers are not being met "Drowning ininformation, but starved for knowledge" is a common enough saying

The traditional monthly information pack, even if accurate, gives the manager very littlechance of verifying the accuracy of the data it contains Poor presentation does not help inits interpretation and its late arrival means that the likelihood of making good decisions isremote

There are other areas of concern Information currently provided to managers is biasedtowards financial indicators and concentrates on internal matters; it very often providesinsufficient information on non-financial and external factors

What are the consequences of not meeting the information needs of managers?

By providing primarily internal financial information managers tend to concentrate on

operations, rather than policy and direction Yet most successful changes in business

direction are triggered by quickly reacting to external events, such as changing consumertastes The result for the business is a slow-moving company with competitors stealing amarch

Generally, it is reasonable to say that "good companies follow indicators, bad companiesfollow the crowd"

In summary, the consequences of managers not being provided with the right information are

an ill-informed decision-making process with missed opportunities for the business

An Illustrative Example

A Company manufactures industrial glues and solvents in a single large factory

Two years ago, with the company only just breaking even, the directors recognised the needfor more information to control the business However, their current information provisionconsisted of:

1 A summary business plan for this and the next two years The plan includes details ofthe expected future incomes and expenditures on existing product lines It was

produced by a new member of the accounting department without reference to pastproduction data

2 Stock balances on individual items of raw materials, finished goods etc This report is

at a very detailed level

3 A summary of changes in total demand for glues and solvents in the market place forthe last five years This information is presented as a numerical summary in six

different sections

The Problem and What is Required

The information presented to the directors does not seem suitable for the strategic decisionsthat they need to make In particular, the technology involved in glues and solvents is veryspecialised and new chemical formulae could make old processes out of date very quickly

The Role of Traditional Information Systems in Today's Business Environment 11

 The business plan does give some direction but it does not contain past production

data and therefore trends are difficult to see This means that any assumptions madeabout growth rates will be very speculative

The business plan needs to be much broader and include not only historical

information, projections and assumptions but also other market-related informationsuch as an analysis of competitor positions and other market dynamics

 The stock balances are too detailed for the directors In effect, they are much more

suitable for operational purposes and should therefore be sent to more junior managersrather than the directors

The stock balances should be summarised and only important variances or significantbalances reported, e.g any large-value stockholding would require the directors'

attention

 The summary of changes may also be too detailed but, more importantly, it is

presented in numerical summary without explanation or useful marketing intelligencefor the directors The report is therefore of little use in its present form for this level ofmanagement

The summary needs to be changed to highlight any patterns in the general marketbehaviour, perhaps with the use of text and graphs as well as numerical summaries

At the operational level the information is mostly used in a control mode to ensure that all

the necessities of a process are available and ready

There is also the need for scheduling and this comes into the planning activities at this

management level Typically, scheduling will require information on aspects such as:

 The personnel shift and holiday information can be brought into the scenario beingdeveloped

 All reports and inquiry requests

 All cost factors and budget details

In this way a complete picture is compiled so that a schedule can be set

At the tactical level, managers need information to ensure that the needs of the operational

level are met Typical information requirements at this level are:

 Staff recruitment and training

 That all the necessary acquisitions are made when appropriate

 That a medium term plan exists of the operational activities to be undertaken

At the strategic level, information on the overall market situation is examined and the range

of products from the company decided on The emphasis is now on the relationship betweenthe company and the external world A long-term strategy is set and all the parameters forthe guidance of tactical managers are decided on

The New Business World

The new world of business is dominated by information The developments of networkswithin companies allowed them to co-ordinate and streamline their internal activities Thedevelopment of the Internet now requires them to change their trading activities There hasnever in all of history been as much change required in the business world as there is today

Not Only Managers Require Business Information

It is very easy to concentrate upon managers as the recipients of business information But

in order to carry out their particular roles, other groups of people also require such

information

The Chartered Institute of Management Accountants has distinguished ten groups/user types

of business information needs:

 The public, both national and international;

 The shareholders;

 The board of the company and any special committee groups;

 Directors with functional responsibility within their managerial duties

 Divisional general managers

 Divisional functional managers reporting to divisional general managers

 Departmental heads and assistants

 Section leaders, foremen and chargehands

 Discretionary employees, who specifically need information about the company to carryout their duties

 Non-discretionary employees who only perform set tasks in a prescribed manner

And I am sure you can think of others.

The Role of Traditional Information Systems in Today's Business Environment 13

G INFORMATION SYSTEMS

What is a System?

A dictionary definition of a system is:

"Anything formed of parts placed together or adjusted into a regular and connected whole."

Another definition of a system is:

"The method by which an individual, organisation or mechanism accomplishes the tasks necessary to achieve its objectives."

It would be worthwhile pausing for a moment to think of some of the systems we are allfamiliar with You may well have thought of:

 A central heating system

These are all examples of physical systems

We, as information specialists, are only interested in physical systems However, in passing,

we can note that some systems are abstract by nature, because they are systems of ideas

In each of the examples I have identified above and in many others I could have included, wesee that a system is not a random coming-together of components It is those components,

or elements, that come together for some purpose Because the system has a purpose it

displays a behaviour As a brief example, a central heating system's behaviour consists ofswitching on and off the heating mechanism so as to produce and reduce heat output, andthen pumping the heat around the infrastructure of the system in order to heat a series ofrooms

System Characteristics

The central heating system behaviour allows us to see several of the characteristics of asystem:

 There is an input, which in the example was heat.

 There is a process, which in the example was to pump the heat around the system.

 There is an output, which in the example was to put heat into the room.

 There is a boundary, which in the example is the rooms being heated.

 There is an environment, which in the example is any rooms or other places not being

heated by this system The input to the system comes from the environment, thuscompleting the cycle

Let us reiterate these characteristics:

 In general, a system consists of an input, a process of some sort and an output

 A system has a boundary within which the system operates, and outside of the

boundary is an environment

Unfortunately, systems are never simple All systems consist of several subsystems Each

is itself a system, with all the system characteristics Each subsystem performs a function onbehalf of the larger system A boundary between subsystems is known as an interface and

at the interface of two subsystems, the output of one becomes the input of another In fact,

in a fully integrated system each subsystem has as input, the output of another subsystem,

so that all the subsystems together fulfil the overall objective of the whole system

Of course, subsystems are usually given quite different names In a complex task the

subsystems are often called procedures In a company, a department is a subsystem, as inthe following diagram:

The Company

Resources

SuppliesMachineryMaintenance

ProductadvertisingSamplesSales

In the diagram, each department is a subsystem of the overall system, which is the company

In turn, each subsystem has a number of smaller subsystems, shown by the functions, and

we could break the structure down even further into smaller and smaller subsystems

Important: It is most important that a system has a purpose and its only justification for

existence is to fulfil that purpose

In this example, the purpose is very clear and the subsystems are all necessary for thecompany to fulfil its purpose according to the company strategic plan and aims

Yet, I am sure we are all familiar with systems whose purpose we can only wonder at As anexample, why do Local Authorities require us to fill in a multitude of forms when requestingsome service, when many of the forms ask the same questions? In such circumstances, weare certain these are systems whose only purpose is to support their own existence Whilstthis example does not break the rule for being defined as a system, it cannot be considereduseful

What is an Information System?

Quite clearly, an Information System is a system that provides us with information.

Our next job is to identify each of the system criteria in our concept of an Information System

 The input is the data that is stored in the Information System database.

 The process is in fact a series of processes to collate, sort, store, extract, present and

manipulate the data

The Role of Traditional Information Systems in Today's Business Environment 15

 The output is the information produced by the Information System, generally to

support decision-making

 The boundary is the company or organisation that owns the Information System,

although in some cases it could be the subsystem of the company that is responsiblefor decision-making

 The environment is the trading environment of customers, competitors, national and

local economic climate, etc The data that is input derives from this environment

 The purpose is to support those in the company who make decisions It is intended to

make the company more efficient and hence competitive

I have not made it a requirement that the Information System have subsystems This is notnecessary for a system to meet the definition But in fact, the Information System does havesubsystems These are:

 A subsystem to input the data to the database This can be via direct keyboard input or

it can be an automated machine reading process There are all sorts of ways of

collecting data

 The second item in the criteria satisfaction list above gives several subsystems Theyare all separate software processes that work on the data as it is converted to

information

 To be of use within an organisation, the Information System will be implemented across

a system of computers called a network Whilst we will be examining networks in detaillater in the course, it is just a series of computers connected together electronically sothat they can communicate either with each other or with a central computing resource.The computer network is a subsystem of the whole Information System

We can now legitimately ask:

 How does it provide the information?

 What information is provided?

and obtain the answers:

 First, it is provided using a computer

Information Systems are always taken to be computerised

This is a historical understanding through the long development of computers for theprocessing of mass data The 1890 census in the United States was the first real use

of a tabulating machine for the collation of a large quantity of data By the 1950s themachines had become electronic and the term "computer" was in wide use Alsoduring the 1950s businesses began to use electronic computers for the processing ofanything that came in large batches Accounting departments were usually the firstdepartment to develop electronic data processing (commonly known at the time asEDP) for such tasks as payroll and inventory processing Until very recent times thecomputing department was still a section of the financial function of many companies.Gradually the more innovative businesses developed systems that took the computerfiles used in the transaction data processing and used them as an aid in the

preparation of management reports

At this point the emphasis in the computing function has moved away from processesand transactions and towards data So that, instead of developing processes for somepurpose and then looking for data to process, we now collect the data into a storeknown as a database and then develop processes to handle this data in whichever way

is required

 Then the information that is provided depends upon:

(i) What was asked for

(ii) The context in which it was asked

(iii) What is available to be provided

The data representations are held in a large database We will be discussing database insome detail in a later unit

The database will hold data on all sorts of aspects of the scenario

In a company, this will include:

Everything pertaining to the company that can be stored on a computer will be stored

Using such information, questions can be asked about, for example:

 Last years sales returns,

 Which personnel earn a designated salary,

 What are the company holiday schedules,

 How much cost is incurred in making a product,

What is a Management Information System?

This is an Information System that provides information for the management of the company

It is quite normal to refer to the Management Information System as just the "InformationSystem" You will also come across the term MIS However, I shall not use this in the

course

In practice, the Management Information System is the main function of the computing

function within most companies, the other functions being specialised control functions.From our previous reading of an Information System, you will readily appreciate that theManagement Information System is implemented across a computer network

The data illustrated above is typical of a Management Information System

As I have discussed and from these illustrations we can see that the data accessible to theManagement Information System is drawn from all sections of the company

The Role of Traditional Information Systems in Today's Business Environment 17

system

We can now give a definition of a Management Information System

A Management Information System (or Information System as it is sometimes

called) is a computerised system that provides corporate information to aid the

management of the company

Users of a Management Information System

It is not enough for us just to say that managers are the users of a Management InformationSystem Whilst managers do use it, they are not necessarily the only users within a

company In addition, individual managers will use it in different ways

First let us note that the Management Information System is intended to help with the

management of the company and this can involve any authorised person accessing the

The Main Management Levels

In the next study unit, we shall be looking in detail at the main levels of management At thisstage, however, it is useful to take a brief look at these

 The "strategic level" is that of the directors and executives of the company It is at thislevel that corporate policy is decided

 The "tactical level" includes all those considered to be at middle management level.This is the level at which overall control is exercised

 The "operational level" is the level of direct supervision and it is at this level that day operational control is exercised

day-to-The Management Information System will make information available to each of these levelsthat is consistent with the level Operational level management will not have access to

Strategic level

Tactical level

Operational level

tactical control information and tactical level management will not have access to making information We shall consider this next.

policy-Access to the Management Information System

I have implied above that access to the Management Information System is controlled insome way to allow pre-set types of access to individuals

As well as the above example, different users will have different degrees of access Forexample, shop floor management may only have access to their own departmental

information Such information will probably be very detailed, as, at this management level,full access is needed to the department's daily and weekly figures On the other hand, thesemanagers do not require access to the personnel records of the company and so this will bedenied

At a senior level, detailed figures are not so important, but, as we have previously discussed,summaries of the figures in the form of totals and averages are In addition, senior

management need access to every departmental database as they will need to consider thewhole company

There will also be some managers who have access to specialist information only Forexample, the computing manager is not interested in a department's information The

computing manager will more likely be interested in the processing load on the ManagementInformation System, the availability of the necessary data, who has access and what type ofaccess, the changing processing requirements, machine reliability, and so on

Information System Data

The data held in a Management Information System database will always be historical data.That is not to say it is very old, only that it is not current

For example, using some of our previous examples:

 "Sales records" are usually at least a day old

 "Production schedules" may contain forward-looking information but they are previouslyprepared and are based on experience

 "Personnel records" are created and populated when a person joins the company

And so on.

Reliance on the Information System

Information Systems have infiltrated some businesses to the point where these businesseshave become fully dependent upon the Information System:

 The most familiar instance of this is banking Every bank in the world now uses

Information Systems for all their activities and simply could not operate without them

In fact only very short interruptions to the system's operation can be tolerated Forexample, many bank share-dealing systems in the United States had computerisedsystems that automatically shut down should the share price fall too fast When thisactually happened there was chaos as the systems were not able to respond to thecorrective action taken by the banks to stop the fall These automatic systems wereimmediately changed to be much less reactive We are also familiar with the frustration

of finding the ATM machine to be down and leaving us penniless at some crucial time

 Another instance of total dependency is the airline booking system As all large airlinesrely on would be travellers being able to book a seat from anywhere in the world via thededicated booking Information System, there would be no travellers at all should thesystem fail for any length of time The same applies to their flight scheduling systems

The Role of Traditional Information Systems in Today's Business Environment 19

 The innovation of Internet based companies means, by definition, they are completelyreliant on their Information Systems Should the Information System fail; there wouldeffectively be no company

 The telephone system is fully dependent on Information Systems and without thesewould cease to operate

There are many more that could be listed here The point being that Information Systemshave permeated practically all businesses and without the Information System the businesscould not trade

H THE SOCIO-TECHNICAL SYSTEM ENVIRONMENT

One our criteria when defining a system was the environment The environment in which anInformation System exists is extremely important as it is the environment more than anythingelse that governs the nature of the Information System and the information it supplies The

environment has aspects that are technical, such as the organisational structure of the company and its computer facilities, social, in which are the people involved with the system, and economic, both internal to the company and external to it.

The Economic Environment

There are two economic environments for all companies Within the company, a profit must

be generated, or, in the longer run, it cannot survive With the speed of modern informationcommunication customers are always aware of the alternatives offered by competing

companies, and so any one company's customers will demand only high quality products andservices This means that the company must be open to change and be responsive to

customer needs The secret to achieving this is a reliable and complete information service.And this is what the Management Information System is designed to supply

The other economic environment for all companies is the wider market place From ourManagement Information System perspective, this is very much a flow of information onmarket trends and developments Every company must be responsive to these Informationcannot be contained within national boundaries and so the company needs access to

international information flows; and there are plenty of those

The Technical Environment

This is both the technical structure of the company and the entire computerised

infrastructure, including communications

The relevant information flow here is from the user staff Users must always be consideredwhen implementing and operating any aspect of the technical environment Yet, even that isnot enough Operational staff must also be involved in decision making on matters

appropriate to them, this being another way of delegating responsibility There is, therefore,

a need for information to flow throughout a company

The Social Environment

Anything involving people comes within the social environment The social environmentgroups together matters such as:

decision-making are all ways of ensuring job satisfaction

of full information on the company, both now and in the future Of course, following onfrom consultation, matters that have been raised should be seriously taken into

account

 Training It is important that all staff are given full and appropriate training whenever it

is needed It is not enough to just give a short introduction to the company when aperson joins: training must be provided whenever there is any change And under anyscheme for the reporting on and assessment of staff, training must always be on offer

Local Area Networks (LANs)

A LAN (Local Area Network) is, as you would expect, a group of computers, which are

geographically close to each other, connected together Typically, computers within a

business or part of a business will be connected in a LAN

The LAN is a communication system that allows a variety of units such as PCs, word

processors, fax machines and e-mail systems to pass information from one to the other.The benefits to be derived from linking together personal computers are enormous and areattractive to office managers and staff alike They increase productivity, improve efficiency,lower capital costs and enhance the quality of the workplace One of the main advantages ofLANs is the sharing of hardware, which is both expensive and often under-utilised Forinstance, several personal computers can be linked to one printer that serves them all Workgroups tend to use similar files and data Hence a shared data store brings many

advantages – not least a consistency of using common data

A typical LAN topology would be:

Wide Area Networks (WANs)

A WAN (Wide Area network) is more or less the same as a LAN except the geographicalrestriction does not apply WANs are linked via communication controllers (special

computers) that do the hard work of making connections and transmitting data These

terminals

Sharedstorage

Sharedstorage

Centralresources

The Role of Traditional Information Systems in Today's Business Environment 21

communication computers also have memory for temporary storage and for security A WANwill probably consist of several LANs connected together and the communication controllerco-ordinates the delivery of resources across the WAN

The Internet

The first question you may ask is, "We frequently talk of the Internet, but what is it?" Well,

the Internet is nothing more than an enormous network of computer networks It is

thousands of computers connected together

The beginnings of the Internet were with the United States military and their fear of nuclearattack following the Soviet Union's launch of Sputnik, the first satellite, in 1957 To protectvital communications within the university-based technical and research facilities of theDepartment of Defence, four universities in the US (Stanford University; UC in Los Angeles;Santa Barbara; University of Utah) were connected together via a dedicated line By 1969four other US networks were connected in and the reality of the Internet was achieved Oncethe connections were expanded into the normal telephone dial-up system, it became possible

to bring in computers across the world Meanwhile, local comparable set-ups were

developed in many places and whole groups of computers were connected into the system

It did not take long before we reached the stage that we now know in which the Internetstretches to every part of the world and, using cell or mobile phones, to places remote fromthe actual computer

The Internet will rank as the world's largest WAN! However, it lacks the control and

cohesiveness of a WAN

SUMMARY

We began this unit by stating that its main aim is to introduce you to the concept of

information and its importance in the modern business environment, and to consider the role

of Information Systems In working toward this aim:

 We began with a study of Information This led us into a look at the attributes of

useful information, the nature of quality information and the presentation of information:

 We next looked at business information and management information

 There was then a fairly long section on Information Systems and Management

Information Systems and their environment

 And finally we briefly looked at the use of networks in the business world

A Internet Based Systems and the Digital Firm 24

B Advantages of using Internet Based Systems 25

In summary we shall examine the following:

 The nature of Knowledge

 Internet Based Systems and the Digital Firm

 Knowledge and its usefulness in Information Systems development

 Information Systems as a "Strategic Resource"

Objectives of the Unit

After studying this unit, you should be able to:

 Discuss the impact of Information-Based Systems on an organisation

 Discuss and explain the emergence of the "Digital firm", and how significant

relationships with customers, suppliers and employees are digitally enabled

 Examine and distinguish between the knowledge needed for understanding technicalaspects of IT Systems, and the knowledge necessary for Information Systems

development and design

 Explain why Information Systems can be considered a "Strategic Resource"

A INTERNET BASED SYSTEMS AND THE DIGITAL FIRM

It is imperative that we begin with an understanding of what we actually mean by the term

Internet Based Systems and the concept of the Digital Firm An Information System, as

described in Unit 1, is the system of persons, data records and activities that process thedata and information in a given organisation, including manual and / or automated processes,and support the activities of managers and other workers throughout the organisation

Internet-based systems make use of network technology in particular the Internet in providingsystems that enable, enhance and link the activities of offices, factories and sales forcesacross the globe

With the rapid spread of the Internet in recent years there has been an increasing interest inthe use of Internet-based technologies for supporting work practices in global organisationsand to facilitate business-to-consumer and business-to-business electronic activities WhileInternet-based Information Systems are continually being developed, there are numerousinterpretations as to the overall capabilities these systems bring to an organisation and

indeed their role Information based systems integrate information across networks creating

an information infrastructure where by information can flow not only from one part of anorganisation to another, but also to customers, suppliers, and business partners using astandard platform and infrastructure Ultimately these changes are leading to fully digitalfirms where by all internal processes and relationships with customers and suppliers are nowdigitally enabled

Technological innovations and changes in the domestic and global environment have madethe role of IT and Information Systems even more important to managers than ever before

As the current era shifts away from the production of physical goods to the manipulation ofinformation companies are becoming more reliant on the information provided via suchsystems

The Role of Internet Based Information Systems in Today’s Business Environment 25

You may ask the question what the result of the Internet and Internet-based technologies hashad on the contemporary business environment and the type of opportunities and challengestechnological innovations have developed within organisations and their managements.Some examples include:

 Internet Growth and Technology Convergence has brought about the rapid

development of new business models: E-Business, E-Commerce and E-Governmentunderpinning new markets and market growth The growth of the Internet is bringingabout the convergence of technology, rapidly changing markets, and firms in the

process Traditional business relationships and the way in which firms operate arebreaking down and in many instances new ones being created Today, networkingpower in particular the Internet are nearly synonymous with doing business resulting in

a shift in the relationships firms now have with their customers, employees, suppliersand logistic partners

 Transformation of the Business Enterprise The current developments in

information technology have resulted in the flattening of traditional organisation

structures, flexibility in work processes and procedures, decentralisation, the

empowerment of employees, collaborations and teamwork The Internet and relatedtechnologies make it possible for firms to conduct business across boundaries almost

as efficiently and effectively as it is to conduct business within a firm, therefore resulting

in location independence Today's firms are no longer dependant on the local skill base

to design, develop and produce their goods and services Though the use of

technology it is now possible to maintain strong working relationships with suppliersand other business partners and outsource work as and when required

 Globalisation Foreign trade in the form of both imports and exports is on the increase

as the size of organisations competitive environment increases on a global scale Thesuccess of firms today and in the future depends greatly on their ability to operate andcompete globally Today's Information Systems provide the communication and

analytical power that firms need to manage business and conduct trade on a globalscale, and are bringing both new threats and new opportunities to business

 Rise of the Information Economy Major world industrial powers are transforming

from being placed as industrial giants to knowledge and information based serviceseconomies Many organisations have now come to realise the impact information has

on their business activities and the way in which they are able to utilise this as a keyresource

 Emergence of the Digital Firm Widespread technological change coupled with

globalisation has led to the development of a new organisational form termed the

"digital firm" Digital firms are characterised as having highly decentralised structuresand networked organisations that leverage IT to digitalise business processes andfoster creativity They present managers with the challenges of making rapid decisions

in response to closely monitored and dynamic environments while creating conditionsthat foster innovation and creativity among employees

B ADVANTAGES OF USING INTERNET BASED SYSTEMS

Managers and business firms invest heavy in IT and systems in the hope of providing value

to the business The long-term goal of any such firm is that there will be a high return oninvestment and long-term profit making potential From a business perspective InformationSystem are important instruments in this process enabling a firm to increase revenue anddecrease costs by providing management and staff with a greater value of information toform better decision-making and improvements in business processes Examples of theseinclude:

 The way in which businesses are able to manage their customer contacts.

 The way in which business provide customer service.

 The way in which technology can be use to promote targeted advertising.

 The uses of technology in e-mail direct marketing.

 Customer knowledge: data analysis engines.

 Improvements in supply chain logistics.

C WHAT IS A DIGITAL FIRM

The combination of powerful technology developments and global business opportunities hasled to the creation of new organisational forms and new challenges in managing them

These new organisational forms are often referred to as the "digital firm", with emphasise thatevery aspect of the firm is touched and potentially transformed by digital processes

Managers of digital firms need to identify the challenges facing their firms; understand thetechnologies that will help them meet these challenges; design business processes to takeadvantage of the technologies; and create management procedures and policies to

implement the required changes

The emergence of the digital firm has brought about:

 Digitally-enabled relationships with customers, suppliers and employees

 Core processes accomplished via digital networks

 Digital management of key corporate assets

 Rapid sensing and responding to environmental change

As a result the emergence of the Internet and Internet based technologies has brought aboutsignificant changes in the way businesses operate and their direct relationships with

customers, suppliers and their employees

Relationships with Customers

The Internet provides companies with new channels of communication and interaction thatcan in the long run create closer yet more cost-effective relationships with customers

particularly in the areas of sales, marketing and customer-support Manufacturers can sellproducts directly to customers without the need of an intermediary in the form of a distributor

or retailer As a result of this organisations are able to reduce the purchase transaction costssignificantly and therefore the price at which goods are sold to a consumer

Marketers are using the technology of websites to store information on customer's behaviour,preferences, needs and buying patterns and support customer via one-to-one customisedmarketing techniques

The Web and other technologies are also inspiring new approaches in customer service andsupport Many are using their websites and e-mails to answer customer's enquiries andprovide helpful information, as well as proving section on frequently asked questions andautomated self-responses On the sale of items sellers can also provide continuing on-lineafter sales support for products or services to help ensure that the customer is satisfied andwill return to buy again

Relationships with Suppliers

The relationship between an organisation and its operating business channels can be

The Role of Internet Based Information Systems in Today’s Business Environment 27

often occur due to the developments in technology and Internet based systems that haveenabled firms to bypass some of their traditional intermediaries in a process known as

disintermediation or the "cutting out of the middle man" From top to bottom below the first

diagram represents a traditional business model using traditional business channels from themanufacturer of goods, through a wholesaler, retailer and then onto a final customer Thesecond two diagrams on the other hand represent different forms of disintermediation wherethe middleman i.e the wholesaler, retailer or both are bypassed in the selling process

between manufacturer and end consumer

Relationships with Employees

Intranets and Extranets as discussed in Study Topic One are used extensively by manybusinesses in supporting the internal functions and operations of a business In many casesthey provide information on:

 Staff phone directories

 Staff procedures or quality manuals

 Staff bulletins and newsletters

 Training information

 Product specifications

D CHANGES RESULTING FROM COMPUTER SYSTEMS

It is just not possible to introduce any computerised system, including an Information System,into a company or other organisation, and expect it to have no effect upon the company Therange of effects is almost endless However, we can identify some of the more commoneffects

Some typical changes arising from the introduction of a computer system will be as follows:

 Changes in Relationships Traditional assumptions are invariably challenged when a

new system is envisaged and, when weaknesses are revealed, management will oftenfeel resentful and less secure Also, managers involved may find that they have aheavier workload as a result of the change to the computer application, perhaps forcingthem to neglect other matters On the other hand, the computer may sometimes belooked upon as breaking down traditional departmental and divisional barriers, theformation of project teams obliging personnel to work together

 Changes in Controls The system may be regarded as too rigid to be able to deal in

practice with the many variable elements involved But, it may also be that the

Consumer Wholesaler Retailer

organisation finds, for example, that the prompt and thorough market analysis madeavailable by the computerised system leads to an increase in its market share On theother hand, management could be overwhelmed by the new data outputs, so thatmanagers still secretly rely on the former, trusted system.

 Changes Relating to Organisation Greater centralisation of decision-making is

possible through the existence of the computer system Maintenance of, say, customeraccounts may be removed from the branches of an enterprise and undertaken in

regional centres

 Changes in Planning Activity Planning may become a day-to-day activity, whereas

formerly it was an annual budget preparation exercise, so that the budget can now berecast to give the effect of pricing policies, actual performance and so on Managerspreviously using the pragmatic planning approach may tend to feel that the system is incharge of them, as planning activity programs, scheduling and procedures becomemore exact

 Inflexibility One main alteration brought about is that the computer system is very

often guilty of giving rise to rigid inflexibility People cannot now behave on a "give andtake" basis Rules are now operated, quite irrespective of the circumstances Muchhigher standards of accuracy and discipline generally bring about resentment and, itmust be added, much pleasure from staff in uncovering computer errors However, agood deal does depend also upon past relationships Where these have been first-class between management services staff and the other personnel, then there is morethan a good chance that this will give a flying start to management services work on thecomputer system

 Knowledge and utilization In recent years, many organisations have come to

recognise the importance of information as an important asset This realisation has led

to a renewed emphasis on ensuring that knowledge of how to utilise information

resources is used as effectively as possible within an organisation and that firms areable to manage their assets over time The concept of Knowledge is often difficult todefine than that of data and information as studied in Unit 1 It can however be defined

as the next level of sophistication or business value in the cycle from data throughinformation to knowledge Although you may find numerous definitions, many tend toagree that it involves harnessing a person's unique abilities, such as his or her

perceptions, experiences, intuition and analytical skills When these abilities are

combined with the information a person holds, this represents knowledge Knowledgecan therefore in its simplest form be described as the combined result of a person'sexpectations and the information they possess

 Changes in relation to the overall business and core business processes.

Computer Systems enable the process of large amounts of information very quicklythereby saving time, cutting costs and increasing productivity Perform rapid analysis

of large quantities of data from diverse sources thereby facilitating decision-making.Provide new, improved means of communication thereby facilitating co-ordination &control, group working and decision-making Automate work processes which cutscosts, reduce errors & enables staff to concentrate on tasks that require higher orderskills, and create the capability to restructure organisations & create more flexibleforms of work

 Changes relating to the Government & the introduction of E-Government

e-Government [electronic government] also referred to as e-gov, digital government,

and online government or in a certain context transformational government, refers tothe government's use of IT to exchange information and services with citizens,

businesses, and other arms of government e-Government is often applied to services

in order to improve internal efficiency, the delivery of public services, or processes of

The Role of Internet Based Information Systems in Today’s Business Environment 29

Customer (G2C), Business (G2B) and Government (G2G) and Government-to-Employees (G2E) The most important

Government-to-anticipated benefits of e-government include improved efficiency, convenience, andbetter accessibility of public services In countries such as the United Kingdom, there

is a continued interest in using electronic government to re-engage citizens with thepolitical process In particular, this has taken the form of experiments with electronicvoting, aiming to increase voter turnout by making voting easy The UK ElectoralCommission has undertaken several pilots, though concern has been expressed aboutthe potential for fraud with some electronic voting method

 New Collaborations Internet technologies have helped form workable partnerships

between customers, suppliers and other firms to improve planning, production, and thedistribution of goods and services Within organisations firms are using Internet

technologies in the development of new products and services among departments in asingle firm or amongst several firms Firms are also using the feedback from

customers via their websites to improve the services they offer and the design of

goods Examples of collaborations include product service and support, product

design across multiple locations, customer service, supply chain coordination andcollaborative souring

E KNOWLEDGE

What is Knowledge?

Knowledge is defined in the Oxford English Dictionary as:

"expertise, and skills acquired by a person through experience or education; the

theoretical or practical understanding of a subject"

"what is known in a particular field or in total; facts and information"

"awareness or familiarity gained by experience of a fact or situation"

Whilst there is no single unified definition of knowledge it could be explained by the

statements:

 Knowledge is what I know

 Information is what we know

Explicit knowledge is the knowledge that has been or can be articulated, codified, and

stored in certain media, and can therefore be readily transmitted to others The most

common forms of explicit knowledge are manuals, documents and procedures Knowledgealso can be audio-visual Works of art and product design can be seen as other forms ofexplicit knowledge where human skills, motives and knowledge are externalised

Tacit knowledge is knowledge that people carry in their minds and is, therefore, difficult to

access Often, people are not aware of the knowledge they possess or how it can be

valuable to others Tacit knowledge is considered more valuable because it provides contextfor people, places, ideas, and experiences Effective transfer of tacit knowledge generallyrequires extensive personal contact and trust, and can only be captured from people whocommit to the organisation

For organisations to make the best use of their information resource and the creation ofknowledge they must be able to distinguish between tacit and explicit knowledge, and identifypatterns for creating knowledge in organisations, these form a knowledge spiral:

 Tacit to tacit – acquired through the creation of socialisation processes and the

development of new knowledge for the learner

 Explicit to explicit – the gathering of codified knowledge and expressing it in a new

medium that others are easily able to decode

 Tacit to explicit – translating personal knowledge into a codified form from which

others can benefit or which can form the basis of innovation

 Explicit to tacit – explicit knowledge that is shared with others is internalised by others

and becomes new knowledge for them

Why is Knowledge a Vital Resource?

Studies have found the reasons firms invest heavily in knowledge and knowledge

management systems A knowledge management system can be defined as systems thatenable the intentional collection, classification, and dissemination of information about acompany, its products, and its processes This type of knowledge is developed over time byindividuals working for or with a company in the hope of:

 Improving profit / growing revenue

 Retaining key talent / expertise

 Increasing customer retention and / or satisfaction

 Defending market share against new entrants

 Gaining faster time to market products

 Penetrating new market segments

 Reducing costs

 Developing new products / services

For a business to survive and compete organisations must be equip to make the best use ofknowledge Within an organisation senior management need to recognise the value ofinformation and create an environment of knowledge generation and sharing The culture of

an organisation needs to emphasise continual learning and tolerate mistakes (productivefailure), and develop systems which reward information and knowledge sharing Successfulorganisations have achieved this by:

 Providing informal opportunities for staff to meet and socialise

 Fostering communities of practice

 Consciously learning from other companies and from customers

 Transferring best practice between different parts of the organisation

 Importing expertise from outside

 Establishing centres of innovation

SUMMARY

In this unit we began with a study of Internet based systems and the Digital Firm:

 We next looked at the advantages of Internet Based Systems.

 There was then a section on the Digital Firm and the changes relationships companies

now have with their customers, suppliers and employees

 We then looked at the changes to the company culture resulting from the introduction

of computers and networks

 And finally at we briefly looked at the use of knowledge in the business world.

Study Unit 3

The Role and Function of Information Systems in

Supporting Business Operations

D Office Automation Systems and Transaction Processing Systems 44

E Different Information Systems and Management Levels 45

(Continued over)

G Systems from a Functional Perspective 49

The Importance of Knowledge Management Business Strategy 53Impact of Knowledge Management on the Organisational Structure 54Overview of Customer Relationship Management Systems 54

The Role and Function of Information Systems in Supporting Business Operations 33

Then we shall study what we might expect from an Information System We shall also beexamining the effect that the organisational structure has on the Information System

We will study:

 The infrastructure of Information Systems and the influences on these structures

 What we might expect from an Information System

 Operational level systems, including control systems

 Management systems

 Decision support systems, including knowledge systems

 Systems from a functional perspective

Objectives of the Unit

After studying this unit, you should be able to:

 Identify the major types of Information Systems and discuss how each supports

managers in the organisation

 Assess the major operational and management roles played by Information Systems

 Assess the strategic role of Information Systems, with particular reference to

competitive advantage

 Assess the role of Information Systems in supporting the functional area of a businessClearly, not all Information Systems or management Information Systems are the same.Each exists to support the current activities of the company and as such will reflect the

operational structure of the company

That is not to say the Information System should simply mirror the organisational structure ofthe company Many companies operate with top-heavy management and others with verylight management For the Information System to replicate these would be inefficient andinflexible

Neither should the Information System just satisfy the information requirement norms of theindustry as a whole as these may not be the best for the company Bearing in mind that theInformation System exists to support the management of the company, not just the

managers, it should reflect the decision-taking structure of the company This means theInformation System should supply the information needs of the particular company and betailor-made for these needs

The point in implementing an Information System is to gain efficiency in decision taking andhence a competitive advantage Should this be successful, the Information System will driveinnovation within the company and sometimes cause changes in the organisational structure

of the company In turn, this will require the Information System to change to the new

circumstances

Changes to the Information System can be quite dramatic as the system becomes moreaccepted The need to integrate with distant parts of the company and to bring in externalinformation leads to the development of networks, as we have seen The technologicalrequirements of networks are quite different to those of simple transaction processing and,once implemented, networks tend to become the only communication channel within a

A WHAT WE MEAN BY AN INFORMATION SYSTEM

In Unit 1 we defined an Information System as a system that provides information for themanagement of the company It is also called a Management Information System

The Information System is the main computing function within most companies, and it isusually implemented across the computer network linking all parts of the business

Characteristics of Information Systems

The main characteristics of an Information System are:

 Information Systems are open systems This means they respond to their

environment This is a very important property as an effective system must continuallyevolve and reflect the world around it Such systems generally involve people, or atleast living creatures The simplest way to imagine these systems is to assume that ifpeople are involved, then it is an open system A company is an open system

The alternative to an open system is a closed system This is a self-contained system

It has no interaction with its environment whatsoever Totally closed systems are

uncommon because they have neither input nor output; in the world of business, theyare practically unknown On the other hand, it does depend upon the viewpoint taken

A payroll system is closed from the company directors' point of view, but is not closedwhen viewed from within the payroll system

We do tend to use the term "closed" loosely when we really mean a relatively closedsystem This would be a system, such as a computer program, that accepts onlypredefined input, and produces only predefined outputs An address retrieval system islike this, as it only accepts names (sometimes post or zip codes) and only produces theaddresses In the home, the water heating system is sometimes said to be closed Asthe temperature rises and falls, the heater switches on and off, and that is all it does.Information Systems can be considered both closed and open This is because theyare human-machine systems and, whilst the machine parts of the system are closed,the people parts are open

 Information Systems are said to be quantitative as they provide a clear, measurable

output Users need concrete information on which to base their decisions

All financial systems are quantitative systems Control systems also tend to be

quantitative