BUSINESS INFORMATION SYSTEM

1. Defining Information Systems

This chapter provides a discussion of the nature of information and systems.

1.1 Defining Data and Information 

It is important to distinguish between data and information. Data is a raw fact and can take the
form of a number or statement such as a date or a measurement. It is necessary for businesses to
put in place procedures to ensure data are recorded. For example, to ensure a call centre operator
includes the postcode of every customer this can be written into their script and a validation
check performed to check these data have been entered into the system.

A common definition of information is that it is data that have been processed so that they are
meaningful. This requires a process that is used to produce information which involves collecting
data and then subjecting them to a transformation process in order to create information. Some
examples of information include a sales forecast or a financial statement.

As stated information is generated through the transformation of data. This can be achieved using
a number of different transformation or data processes. Some examples of data processes include
aggregating which summarises data by such means as taking an average value of a group of
numbers. Classification places data into categories such as on-time and late deliveries. Sorting
organises data so that items are placed in a particular order, for example listing orders by delivery
date. Calculations can be made on data such as calculating an employee’s pay by multiplying the
number of hours worked by the hourly rate of pay. Finally data can be chosen based on a set of
selection criteria, such as the geographical location of customers.

Although information is an useful resource for individuals and organisations not all information
can be considered useful. The differences between ‘good’ and ‘bad’ information can be identified
by considering whether or not it has some or all of the attributes of information quality.
Attributes can be related to the timing, content and form of the information.

Timeliness refers to that the information should be available when needed. If information is
provided too early, it may no longer be current when used. If the information is supplied too late,
it will be of no use. Also the information should cover the correct time period. A sales forecast,
for example, might include information concerning past performance, current performance and
predicted performance so that the recipient has a view of past, present and future circumstances.

The content of the information refers to factors such as the accuracy of the information and

relevance of the information to a particular situation and user.

The form of the information refers to aspects such as the clarity of the information which should
be appropriate to the intended recipient. The recipient should be able to locate specific items
quickly and should be able to understand the information easily. The information should also
contain the correct level of detail in order to meet the recipient’s information needs. For example,
in some cases highly detailed information will be required whilst in others only a summary will
be necessary.

1.2 Defining Systems

A system can be defined as a collection of components that work together towards a common
goal. The objective of a system is to receive inputs and transform these into outputs. In the
previous section ‘defining data and information’ the use of a transformation process was used to
explain how data is converted into information. Not every system has a single goal and often a
system contains several subsystems with subgoals, all contributing to meeting the overall system
goal. For example the finance, operations and marketing areas of an organisation should all have
goals which together help to achieve overall corporate objectives. It can be seen that in systems
data are used as the input for a process that creates information as an output. In order to monitor
the performance of the system, some kind of feedback mechanism is required. In addition,
control must be exerted to correct any problems that occur and ensure that the system is fulfilling
its purpose. There are thus five components of a generic system in terms of input, process, output,
feedback and control.

1.3 Defining Information Systems

The role of the Information systems to provide information to management which will enable
them to make decisions which ensure that the organisation is controlled. The organisation will be
in control if it is meeting the needs of the environment. In relation to control systems can be
classified into open-loop and closed-loop.

An open-loop control system is one that has no way of ensuring objectives are met for a process.
This means they are unsuitable in an organisational context because of the complexity of the
environment in which organisations exist. Thus open-loop systems would only be successful in
attaining a system’s objectives in cases where we know with certainty the events that would take
place during the system’s process.

Closed loop systems can have two types of control mechanism referred to as feedback control
and feedforward control. Feedback control systems generally provide a way of ensuring a system
is under control. Negative feedback is when actions are taken to reverse any differences between
desired and actual outputs. The weakness of this approach is the potential for delay between the
discrepancy and the action taken to reduce it. Feedforward control systems attempt to overcome
the time-delay associated with feedback systems by incorporating a prediction element in the
control feedback loop. Feedforward systems are not as common as feedback systems in business
settings. Examples include project management plans which are made to meet time, quality and
cost objectives over time.

1.4 Business Information Systems 

With the previous definitions of information and systems we can now define a business
information system as a group of interrelated components that work collectively to carry out
input, processing, output, storage and control actions in order to convert data into information
products that can be used to support forecasting, planning, control, coordination, decision making
and operational activities in an organisation. In terms of the components that undertake this
activity, they can be classified into five basic resources of people, hardware, software,
communications and data. People resources include the users and developers of an information
system and those who help maintain and operate the system such as IS managers and technical
support staff. Hardware resources include computers and other items such as printers. Software
resources refer to computer programs known as software and associated instruction manuals.
Communications resources include networks and the hardware and software needed to support
them. Data resources cover the data that an organisation has access to such as computer databases
and paper files.

In most organisations Business Information Systems (BIS) make extensive use of information
technology, such as personal computers. The reasons why computerised BIS have become
widespread are evident in their advantages such as speed, accuracy and dependability. They also
have a high degree of flexibility due to their ability to be programmed to carry out a wide variety
of tasks. There are, however, some disadvantages to BIS such as their lack of creativity that
humans possess and the difficulty of incorporating other factors into their decision making such
as innovation and intuition.

1.5 Types of business information system

Information systems may be divided into two categories of systems that support an organisation’s
day-to-day business activities and systems that support managerial decision making. Operations
Information Systems (OIS) are generally concerned with process control, transaction processing
and communications. Management Information Systems (MIS) are concerned with providing
support to managerial decision making. Recently this division of BIS into operational and
management systems, although useful for managers reviewing the types of BIS in use, does not
now accurately reflect the reality of systems used within an organisation, particularly with the
increased use of inter-organisational e-commerce and electronic data interchange (EDI). For
example e-business systems and enterprise resource planning systems cut across both operational
and management systems to provide businesses with more integrated information systems.