Information technology
The terms ‘information systems’ (IS) and ‘information technology’ (IT) are often used interchangeably. This is an error, because the scope of the terms is different. The stress in IT is on the technology while IS not only refers to the technology, but also incorporates how it is applied and managed to contribute to the business. For this reason, we refer to
BIS throughout this book. Approaches to management of IS and IT as part of BIS strategy development are discussed in more detail later (see Chapter 13).
Computer-based information system an information system that makes use of information technology in order to create management information.
Computer-based information systems
In modern organisations, most BIS make extensive use of information technology, such as personal computers. The reasons why computerised BIS have become widespread are evident in their advantages.
Some advantages of processing by computer
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Speed. Computers can process millions of instructions each second, allowing them to complete a given task in a very short time.
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Accuracy. The result of a calculation carried out by a computer is likely to be completely accurate. In addition, errors that a human might make, such as a typing error, can be reduced or eliminated entirely.
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Reliability. In many organisations, computer-based information systems operate for 24 hours a day and are only ever halted for repairs or routine maintenance.
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Programmability. Although most computer-based information systems are created to fulfil a particular function, the ability to modify the software that controls them provides a high degree of flexibility. Even the simplest personal computer, for example, can be used to create letters, produce cash flow forecasts or manipulate databases.
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Repetitive tasks. Computer-based information systems are suited to highly repetitive tasks that might result in boredom or fatigue in people. The use of technology can help to reduce errors and free employees to carry out other tasks.
These advantages combine to give major benefits to a business, as described in the section on using information systems for strategic advantage later in this chapter. There are, however, some disadvantages to computer-based BIS:
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Judgement/experience. Despite advances in artificial intelligence techniques and expert systems, computer-based information systems are considered incapable of solving problems using their own judgement and experience.
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Improvisation/flexibility. In general, computer-based information systems are unable to react to unexpected situations and events. Additionally, since most systems are created to fulfil a particular function, it can be difficult to modify them to meet new or changed requirements.
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Innovation. Computers lack the creativity of a human being. They are unable to think in the abstract and are therefore restricted in their ability to discover new ways of improving processes or solving problems.
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Intuition. Human intuition can play an important part in certain social situations.
For example, one might use intuition to gauge the emotional state of a person before deciding whether or not to give them bad news. BIS cannot use intuition in this way and are therefore unsuitable for certain kinds of situations.
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Qualitative information. Managers often make unstructured decisions based on the recommendations of others. Their confidence in the person they are dealing with often has a major influence on the decision itself. Once again, BIS cannot act upon qualitative information of this kind.
Figure 2.7 Usage and applications of computer-based information systems by organisational level (shading denotes usage of BIS)
Competitor analysis
Cashflow forecast
Sales order invoice
Executive information systems Decision support systems Information reporting systems
Office automation systems Transaction processing systems Process control systems Strategic
Tactical
Operational
TRANSACTION PROCESSING
Business applications of BIS
Earlier (in Chapter 1), it was shown how the characteristics of the decisions taken by managers vary according to organisational level from operational to strategic. The problems and decisions dealt with at the operational level of an organisation tend to have a high degree of structure. Frequent access to highly detailed information is often required to support the decision-making process. Since BIS are well suited to such situations, they are more common at this organisational level than at the strategic level where unstructured decision making based on qualitative data is more common.
Figure 2.7 illustrates areas of applications for BIS in a typical organisation. Note that there will be fewer applications and therefore lower levels of usage at the strategic level. A need for higher levels of automation and the structure of the tasks carried out mean that highest levels of usage will be at the operational level.
The key operational activities referred to in Figure 2.7 include data processing or handling the large volumes of data that arise from an organisation’s daily activities. Although
‘data processing’ describes a wide range of activities, the most common are transaction processing and process control.
Transaction processing involves dealing with the sales and purchase transactions that an organisation carries out in the course of its normal activities. Banks, for example, handle millions of deposits and withdrawals each day. Process control systems deal with the large volume of data generated by production processes. As an example, a machine producing a precision component might take hundreds of measurements and use these to adjust the manufacturing process. (These types of system are described in more detail in Chapter 6.)
The speed, accuracy and reliability of computer-based information systems mean that they are able to handle repetitive tasks involving large volumes of data. Furthermore, they are best used in situations governed by clear, logical rules. This makes them ideally suited to transaction processing or process control applications. From this, it is reasonable to suggest that the widest use of computer-based information systems will be at the operational level of an organisation.
Data processing Handling the large volumes of data that arise from an organisation’s daily activities is described as data processing.
Transaction processing processing the sales and purchase transactions that an organisation carries out in the course of its normal activities.
Process control systems
systems which manage manufacturing and other production processes.