The nature of information systems

Despite the sophisticated technology, the basic concepts involved in information systems are fairly straightforward and somewhat familiar. In order to understand such systems, it helps to differentiate between data and information, as well as to use a systems view to examine the nature of information processing.

Data versus information. Although we might use the terms “data” and “information” interchangeably, professionals make important distinctions between them. Data are unanalyzed facts and figures. To be useful in managing, the data needed to be transformed into information, data that have been analyzed or processed into a form that is meaningful for decision makers. Electronic data processing (EDP) is the transformation of data into meaningful information through electronic means.

The difference between data is important for managers. For example, faced with stiff foreign competition and the need to operate with a smaller work force, Bethlehem Steel began to explore information technology to help keep the company competitive. A special internal management team worked with 14 experts from IBM to carefully study the information needs. After interviews with 239 workers from all levels of the organization, one issue stood out. “There was too much data and too little information”.

Information processing. In order to obtain the information needed for various purposes, organizations develop information systems. An information system can be thought of as involving inputs, transformations and outputs. The basic elements of an information processing system are the following:

With an information system, data are the inputs. The data then undergo transformation or processing. Processing involves various forms of data manipulation and analyses (such as classifying, sorting, calculating, and summarizing) that transform data into information. Information processing systems also typically make use of data storage, a system of storing data for use at a later point. The outputs are the reports, documents and other system outcomes that supply needed information to decision makers. Controls are safeguards to ensure that outputs are appropriate and serve their intended purposes. Such safeguards can take the form of checks within the system to verify the accuracy of the data and processing, as well as steps to determine the usefulness of the outputs to users.

So an information system can be defined as a set of procedures to collect, process, store, and disseminate information to support planning, decision making, coordination and control.

Management information systems

A management information system (MIS) is a computer-based information system that produces routine reports and often allows on-line access to current and historical information needed by managers mainly at the middle and first-line levels. MISs are oriented principally to tactical and operational issues and are particularly important in planning, decision making and controlling. Typically, they summarize information from transaction-processing systems (a CBIS that executes and records the day-to-day routine transactions required to conduct business) to produce routine and exception reports for use by managers and supervisors. For example, materials requirements planning systems used in operations management supply information to master schedulers concerning any potential difficulties with materials procurement that will affect the schedule, provide information to capacity planners about necessary short-or long-run needs for capacity changes, and produce reports for first-and middle-level managers in such areas as costs, quality and supplier activities.

The term “management information system” is used in a broad sense to describe all computer related systems relevant to management. The term is also often used to designate the field of management that focuses on designing and implementing computer-based information systems for use by management.

Everyone knows that computers can produce information very quickly, and because of this it’s easy for managers to become overloaded. For instance, one recent survey of 1000 large British firms indicated that top executives are being deluged with reports but that reports need further refinement to be useful. Five characteristics are important in making information useful to managers.

Relevant. First of all, it helps if the information is relevant - that is, directly related to the decision at hand. Of course the more unstructured the situation, the more difficult it may be to determine exactly what information is relevant.

Accurate. Information also needs to be accurate or correct enough to form the basis for effective decision making. Just how precisely correct information needs to be will depend on the situation.

Timely. For information to be useful, it needs to be timely - that is, available when needed.

Complete. Information also needs to be complete in the sense that it comes from the appropriate sources and covers all the areas that are required by the decision maker.

Concise. Finally, information should be concise, providing the level of summarization that is appropriate to the particular decision.