Key Elements of Information Systems and Their Applications

Posted on Feb 12, 2025 in Business Administration and Innovation Management

Five Elements of an Information System

An information system comprises these key elements: database, user, information processing, hardware (HW), software (SW), and reports.

Transaction Information vs. Management Information Systems

Here’s a comparison highlighting three key differences:

  • Transaction Processing Systems (TPS): Automate operational processes and integrate large amounts of corporate information. This data is later used by operational-level officials for decision-making.
  • Management Information Systems (MIS): Designed for monitoring, control, decision-making, and administrative activities of middle managers.

Identifying Useful Information: Key Characteristics

Useful information helps to clarify the situation of the environment, system objectives, or results, reducing uncertainty in the decision-making process. Key characteristics include:

  • Accuracy
  • Timeliness
  • Relevance

Conditions for Purchasing Information System Packages

A company should consider purchasing pre-built packages for implementing an information system based on these conditions:

  1. Establish Business Requirements: Define current and future needs and compare them with existing products.
  2. Technical Evaluation: Assess existing products on the market, considering features like effective performance, operational efficiency, and ease of use.
  3. Quality of Documentation: Evaluate the quality of manuals and other supporting documentation.
  4. Manufacturer Support: Check for support options like direct consultation lines, newsletters, and frequent, low-cost updates.
  5. After-Sales Services: Consider training, free installation, and other post-purchase support.

Data vs. Information: An Example

  • Information: The interpretation of data by a user.
  • Data: Symbols supplied to a computer. The difference is that data is not interpreted, while information is the interpretation of that data. For example, when working in Excel, raw numbers are data, but analyzing those numbers to identify trends is information.

Information Systems and Organizational Structure

A Management Information System (MIS), as described by Max Weber, aims to organize information accurately and timely for decision-making in a competitive environment. It must ensure information quality, processing efficiency, transfer, security, and integrity control for improved routine task processing.

Staff Training System: Inputs, Processes, and Outputs

Consider a staff training system:

  • Inputs: Employee name, contracted hours, overtime hours, food allowance (yes/no), transportation allowance (yes/no), and health insurance (ISAPRE) affiliation.
  • Processes: Calculate the employee’s salary based on the name, overtime, and applicable allowances (food and transportation). Pension discounts are also applied.
  • Outputs: Employee’s net salary, cash equivalent of overtime, and itemized deductions.

Types of Information Systems

Information systems can be categorized as follows:

  • Transactional Systems: Automate tasks and business processes, integrating large amounts of corporate information for later use by operational-level officials in decision-making.
  • Decision Support Systems (DSS): Support repetitive and unstructured decision-making, typically developed by end-users. They provide supporting information for middle and senior management in the decision-making process.
  • Strategic Systems: Developed for internal use to achieve competitive advantage through their implementation and use. They support high-level organizational strategies.

Information Systems at Different Organizational Levels

  • Operational Level Systems: Support operational managers in tracking transactions and basic institutional activities. The main aim is to respond to routine issues and track the flow of transactions (requiring accessible, current, and accurate information). Examples include systems recording bank deposits in ATMs or tracking employee work hours.
  • Knowledge Level Systems: Support knowledge and information workers in an institution. They aim to help businesses integrate new knowledge and control the flow of paperwork.
  • Management Level Systems: Designed for monitoring, control, decision-making, and administrative activities of middle managers. These systems typically compare current performance with past performance and provide periodic reports rather than instant information on operations.
  • Strategic Level Systems: Help the strategic level address strategic issues and long-term trends, both within the institution and in the external environment, to adapt to changes and leverage existing capabilities.