Definition of System:System may be defined as a group of two or more interrelated components or sub-systems which serve a common purpose.Multiple Components: Kite and StringRelatedness: Cricket Ball and a volleyballEach individual component of a system has its own goals but together these parts work in harmony.Education System, University System, teaching system, examination system, admission system.

Types of System: Physical and Abstract Systems: Computer Centre, Software Deterministic and Probabilistic Systems: Computer System, Admission SystemOpen and Closed System: Open system needs to receive feedback, subsystems are always open systems

INFORMATION:Information is data that have been organized so that they have meaningful value to the recipient.Data……….Processing…………InformationMat Score (Data) Percentile (Information)

Characteristics of Information: RelevanceTimelinessAccuracyCompletenessSummarizationReliabilityValidity: do you like new productConsistency: consistent base, factory 12 months production but different shiftsAge: should not be oldImpartiality: if the data is collected with a perceived view. Tv popularity, timing of sample collectedCost Benefit Analysis: benefits of info and cost in collectionFrequency: daily sales, or monthly sales, or yearly sales (seasonal changes not appear in yearly sales)

NEED OF AN EFFICIENT INFORMATION SYSTEM:Impact on organizations functionsCreate a database and knowledge baseBring clarity in communication (data dictionary)Improving administration of businessHigh degree of professionalismHelp in directing the organizationImpact on efficiency of managersCreate an information based work cultureImproves quality of decisions (dss)

BUSINESS INFORMATION SYSTEMS: (BIS)Business information systems are sets of inter-related procedures in a business enterprise to generate and disseminate desired information.

BASIC COMPONENTS OF BISHardwareSoftwareDataProceduresPeople

CATEGORIES OF BIS:A) Shared BIS

1) TPS2) MIS3) DSS 4) EIS (Executive Information System)5) ES (Expert Systems)6) OAS (Office Automation System)

B) Personal BIS

TRANSACTION PROCESSING SYSTEMS:TPS process day-to-day transactions of an organization to carry on its business operations. TPS support the monitoring, collection, storage, Processing and dissemination of the organization’s basic business transactions.Financial statements are made, wages are paid to employees, production reports are prepared.Repetitive activities like customer orders processingOne transaction may generate additional transactions e.g. purchase order affects stock

MANAGEMENT INFORMATION SYSTEMSMIS uses information contained in TPS and process them by generating summary reports of information for managers to plan and control operation. These are mainly information reporting systems.Also called Operations Support Systems.Needs of Low to Middle Level Management.Contains information such as budgeted figures, previous year figures, year to datefigures, variances etc. Info to study the actual performance against the planned performance.

DECISION SUPPORT SYSTEMS:Support the process of decision making. Use computers to facilitate the decision making process of unstructured decisions.Used by Middle level managersUse information from multiple sources in an organization which is presented in a summarized form such as graphs and charts to assist management to take strategic decisions.May be defines as what-if approach.MIS is a subset of DSS.

EXECUTIVE INFORMATION SYSTEMS:Lay more emphasis on summary info, integration of external and internal info, exception reporting technique and establish link with the basic operations of the enterprise. Use by top level managersInstalled to reduce load on executivesHelp in making the decision process efficient and effective.What-if analysisReports in standard formats often involving graphsAct as electronic briefing systemsBasically computer based query systems.

EXPERT SYSTEMS:Aim at formalizing expertise an make it available for repetitive type of business decisions.Use artificial intelligence tools to generate knowledge out of information, existing theories, belief and experience of managers.Help human experts perform their job more effectively and replicate the expertise at various locations.These have been developed for the purpose of passing expertise from those with the knowledge to those who need the knowledge in a convenient and easily accessible manner.Designed to replace functions performed by human experts.

OFFICE AUTOMATION SYSTEMS:Integration of computer, telecom and office equipment technologies to improve the execution of business functions through increasing the productivity, effectiveness and working conditions of office support staff.

OAS Combine various technologies to reduce the manual labour required in operating and efficient office environment.

BIS AND THEIR APPLICATION AT DIFFERENT LEVELS OF MGT.Top level management: EIS, DSS, ES, OASMiddle level management: DSS, MIS, ES, OASLower level management: MIS, TPS, ES, OAS

Expert SystemsOffice Automation Systems

TopTop

MiddleMiddle

LowerLower

EISEISDSSDSSMISMISTPSTPS

Expert SystemExpert System

Office Automation Office Automation SysSys

Transaction Processing Systems

Introductionn TPS processes transactions and produces reports e.g. financial statements are made,

wages are paid to employees, production reports are prepared. n TPS supports the monitoring, collection, storage, processing and dissemination of

the organization’s basic business transactions.n Transaction processing systems are those business systems which process day-to-

day transactions of an organization to carryout its business operations. They are also called Operations Support Systems.

List of Business Transactions:n Manufacturing : Production reports, Quality-control reportsn Inventory Management : Consumption of material, Inventory levelsn Accounting & Finance : Financial statements, Accounts of Expense, Tax Recordsn Purchasing : Purchase orders, Accounts payable, Receipt of materialn Sales : Sales records, Invoices and billingn Accounts Receivable : Sales returns, Dispatch of goodsn Payroll : Attendance record, Pay & deductions

Objectives of TPS:n Efficient and effective operation of the organization.n Timely documents and reportsn Increases the competitive advantage of organization.n Provides necessary data for DSSn Ensures accuracy and integrity of datan Safeguards assets and security of info.n Provides framework for analyzing an organization’s activities

Transaction Processing Cycle:n Data Entryn Transaction processingn File and database updatingn Report and document preparationn Inquiry processing

Transaction Processing Cycle:n Transaction taking place in different organizations can be grouped according to four

common cycles of business activity.a) Revenue Cycleb) Expenditure Cyclec) Production Cycled) Finance Cycle

Transaction Processing CycleTransaction Processing Cycle

Revenue Cycle : This Revenue Cycle : This involves accounting involves accounting transactions resulting transactions resulting from economic events from economic events that produce revenue for that produce revenue for the accounting entry.the accounting entry.

OrderOrderDeliveryDelivery

CustomerCustomerOrderOrderEntryEntry

Cash/Cash/CreditCredit

BillingBilling

Transaction Processing CycleTransaction Processing Cycle

Expenditure Cycle : Expenditure Cycle : This involves This involves

accounting transactions accounting transactions caused by the economic caused by the economic events necessary to events necessary to acquire material and acquire material and supplies for the supplies for the accounting entity.accounting entity.

ReceivingReceivingSystemSystem

SuppliesSuppliesPurchasinPurchasin

ggSystemSystem

CashCashDisbursinDisbursin

gg

VoucherVoucherSystemSystem

Transaction Processing Cycle:n Production Cycle:

Production cycle involves accounting transactions related to conversion of purchased inventory into finished products. Materials, labor and overhead are consumed in the production process

Components of TPS:1 Input : The input function accepts data from outside the system so that the data can be

processed in the system.As data is entered, a program must check it for errors which is called data validation

like:a) Missing datab) Valid size for item: too few charactersc) Class or composition error e.g. numeric or dated) Invalid value e.g. negative markse) Range or reasonableness test : marks out of 100f) Comparison with stored data : payment made compared with payment

due.

Transaction Processing CycleTransaction Processing Cycle

Finance Cycle : Finance Cycle : This involves This involves

accounting transactions accounting transactions that record the that record the acquisition of capital acquisition of capital from owners and from owners and creditors, and the use of creditors, and the use of that capital to acquire that capital to acquire assets necessary for assets necessary for generating funds and generating funds and reporting to owners and reporting to owners and creditors on how it is creditors on how it is used.used.

JournalJournalEntryEntry

SourcesSourcesOf CapitalOf Capital

FinancialFinancialReportingReporting

PropertyPropertySystemSystem

2 Storage: Data in TPS is stored in data files and databases in the form of master data and transaction data e.g. Inventory file.

3 Processing: Processing converts data into information. Processing can be Batch processing e.g. payroll processing, customer order processing and online processing e.g. railway booking system.

Characteristics Batch Processing Online

ProcessingProcessing Periodically As soon as

generated

File Update When batch is processed

When transaction processed

Response Time

Several hours or days

A few seconds

4 Outputs : a) Updated master datab) Operational results e.g. salary chequesc) Operational and Summary : detailed report and summary reports, exception

reports (persons exceeding acceptable amt of overtime)Action Reports: authorizes action e.g. salary cheques authorize banksInformation Reports: customer invoicesTurnaround Reports: combine action reports and information reports

5 Backup and Recovery Procedures: backup of stored data and its recovery.6 Coding Schemes in TPS :

a) Mnemonic Codes: div for divisionb) Sequence codes c) Block codes: id codes, data and error checking codesg) Group Codes: master ledger

Controlling TPS:n To ensure completeness of data processing and to minimize the chance of error.n Control Totals : enter bill total and all itemsn Audit Trails : Trial balance

MIS

Management Info System: The term MIS refers to the data, equipment and computer programs that are used to

develop info for managerial use. The systems focus primarily on the info needs of low to middle level managers.

Features of MIS: Summary Information : Operational control and efficiency :

o Budgeted figureso Previous years’ figureso Year to date figureso Variances

Focus on internal information MIS is useful to structured decisions Input mainly comes from TPS

Concepts of MIS:n Management : Management is an art of getting things done through others to

achieve certain objectives of the organization.• Planning : Planning involves future course of action in respect to :

• What is to be done• When it is to be done• Who has to do it• How it is to be done• Where it is to be done• Why is it to be done

Planning:n Planning process involves the following steps

• Setting long term goals of organization• Setting time period for the plan• Identifying alternative courses of action available• Evaluation of alternative courses of action• Selecting the best course of action• Formulating the derivative plans

External Information:n Information requirements regarding external and internal environment

• External Information:-• Government policies• Economic trends• Technological changes

• Availability and cost of various resources• Competitor’s activities• Customer reaction

Planning:n Internal Information:-

• Sales Forecasts• Financial resources and plans• Availability of resources• Capacity utilization pattern• Personnel Utilization pattern• Budget allocation and utilization

Organizing:n Process of organizing involves following steps

• Analysis of activities to be performed for plan• Dividing the activities into convenient tasks• Allocating sub-tasks to people• Delegation of authority

n Organizing relates to people tasks and technologyn Organizing Chart is graphical representation

Organizingn Information required for organizing includes

• Future plans of action• Budgets• Orders• Specifications• Instructions

Staffing:n Staffing: Putting the right person at the right job.n Staffing involves following steps

• Defining the requirements• Selecting suitable persons for these job positions• Training and developing the selected staff• Organizing is job oriented and staffing is worker oriented

Directing:n Directing involves guiding, motivation and leading the peoplen Directing involves the following steps to achieve the objectives of the organization:

• Communication• Motivation• Leadership

Controlling:

n Controlling involves following steps:• Fixing standards for performance• Measuring the actual performance• Observing the deviations between actual and standard performance• Taking corrective actions

n Information system plays a vital role in control process• Measuring the actual performance• Identifying the deviation between actual and stdrd• Analyzing the causes of deviation

Information:n Information is knowledge derived from factsn System: Collection of related components that interact with each other to perform a

task in order to achieve a common objective. A computer information system consists of hardware, software, data, procedures, people and communication links.

n MIS supports management activity

MIS:n Definition : The MIS refers to the data, equipment and computer programs that are

used to develop information for managerial use

Characteristics of effective MIS:n Flexible : Alternative ways of processing datan Versatile : Capable of catering to the information needs of managers who can differ

in their style of decision making and analytical skills and computational abilityn Analytical: Rigorous analysis of data multiple quantitative models.n Communication : Better interpersonal communicationn Integrated: Without integrating processes, individual applications may be

inconsistent and incompatible.n Management Oriented

Prerequisites of Effective MIS:n Database : Same data an be viewed by different individuals in different ways as per

their requirementn MIS Professional : MIS Professional requires knowledge of organizational

functions such as marketing, finance, manufacturing, accounting, management and computers

n Support of Top Management : Full support of top managementn Control and Maintenance Procedures: Checks to ensure that system is being

followed.n Periodic Evaluation.

Constraints in Operating an MIS:n Rational person

n Work vacuum is created ( when all automated )n Sense of being neglectedn Fear of challenge and exposure (for middle and top level management)n Non availability of MIS experts

Advantages of Computers in MIS:n Better decision making (quick reporting)n Data Accessing from Remote locations : Distributed Data processingn Data Storage : data storage and processing at a very high speedn Fast Computations : matrix inversionn Data security : read only, update and delete rightsn Data confidentiality : n Easy access using non-procedural languagesn Flexibility : transfer of datan User friendly : Railway touch system

Limitations of MIS:n Conceived as data processing and not info processingn Insufficient checks and controls in MISn MIS is developed without streamlining TPSn Lack of training would make MIS ineffectiven Cannot provide tailor-made Info packagesn Frequent changes in top mgt. reduces effectivenessn Not a substitute for effective managementn Incomplete update of databasen Obtaining acceptance and support is a problemn Slow in responding to dynamics of market

Factors affecting Info requirements:n Nature of business functions or activities

• Marketing functions e.g. sales• Finance function• Production function• Human resources management function• Information function

n Type of decision making• Structured decisions : preplanned or pre specified or programmable e.g.

inventory order• Unstructured decisions : not pre specified, occur with less frequency, taken

by precedents or experience or predetermined guidelines

Factors affecting Info requirements:

n Levels of Management• Top level (Strategic Planning) : define the goals, policies and general

guidelines for organization. Directing business, market strategies, product-mix. Not periodic. Their info requirements are

• Outlook of the economy• Current and prospective political environment• Prospects of industry• Capabilities of competitors• Alternative strategies• Resource requirement for alternative strategies

Factors affecting Info requirements:n Supervisory Level (Operational planning) :

• short term decisions for current operations• programmable decisions• primarily internal data generated from transactions• sequence of processing is significant e.g. additions to inventory are

processed before withdrawal

Sources of Info and Levels of Management:

n Degree of Summarization and Levels Of Management:

Sources of Info and Levels Of Management :Sources of Info and Levels Of Management :

TopTop

MiddleMiddle

LowerLower InternalInternal

ExternExternalal

Degree of Summarization and Levels Of Degree of Summarization and Levels Of Management:Management:

TopTop

MiddleMiddle

LowerLower DetailedDetailed

SummarSummaryy

Type of Information and Levels Of ManagementType of Information and Levels Of Management::

TopTop

MiddleMiddle

LowerLowerOperatiOperati

onaonall

StrategiStrategicc

Organization structure and Info Needs:CHARACTERISTIC TOP MIDDLE LOWER

Type of Info External Internal Internal

Activity Scope Very wide Functional Well defined

Complexity High Less No

Planning Heavy Moderate Minimum

Attn on Control Moderate Heavy Heavy

Time Frame One to five yr Up to one year Day-to-day

Nature of Activity Unstructured Moderately Structured

Highly Structured

Job Measuring Difficult Less difficult Easy

TopTop

MiddleMiddle

LowerLower

EISEISDSSDSSMISMISTPSTPS

Expert SystemExpert System

Office Automation Office Automation SysSys

Organization structure and Info NeedsCHARACTERISTIC TOP MIDDLE LOWER

Activity Plan, policies Implementing End Product

Mental Level Creative Reasonable Efficient

No. of people Few Moderate Many

Aggregation Aggregate Moderate Detailed

Time Horizon Future Moderate Historic

Accuracy Low Moderate High

Usage Infrequent Moderate Frequent

Inputs to MIS:n TPS :

• Payroll processing• Sales and order processing• Accounts payable and receivable• Inventory management• Material purchases, receiving etc

n Internal Data from Databases : e.g. expenses on sales promotionn Ad hoc requests for information : if product is not selling, then getting area wise

sales

Output of MIS:n Summary reports n Exception reports : stock below minimum leveln Scheduled reports : daily sales report, debtors outstanding, profit and loss a/c,

balance sheetn Ad hoc report: information in response to unplanned information requests.n Drill down reports

• Repairs to building• Repairs to machinery• Repairs to air conditioning• Repairs to office equipment

Four Major Phases of Decision Making:

a) Define the problem: Environment is searched for conditions calling for decision.b) Identification of various feasible solutions: The generation of various possible

course of actions.c) Choice of best solution among alternative: A choice is made of an optimal

alternative. The following techniques of choosing.1) System of Equations2) Linear programming3) Integer programming4) Dynamic programming5) Queuing models6) Inventory models 7) Capital budgeting analysis8) Break-even analysis.

d) Implementation of chosen action: Communication of decision to the subordinates to gain their acceptance and getting their support for putting the decision into action. The result of the decision is monitored. Analysis is made between objectives and actual results and deviation, if any, is analyzed flow of activities but at any stage, there may be return to a previous stage.

Classification of Decision:

DefiningProblem

Identification of feasible alternatives

Choice of the best alternative

Implementation of chosen solution

a) Watch television rather than sleeping.b) Purchase DVD instead of CD player.c) Manufacture product A in your factory instead of product B.

Decision can be classified into following categories: 1) Programmed or Structured decision:

a) Programmed decision is inventory re-order formulas and rules for granting credit.

2) Unprogrammed or unstructured decision: a) The decision is too infrequent to justify the organization cost of preparing a decision procedure. b) The decision process is not understood well enough. c) The decision is too changeable to allow a stable pre-established decision procedure.

Most unprogrammed decision are made by upper level Managers.

3) Strategic Decisions:a) Strategic planning is the job of top level management.

b) Strategic planning deals with long range consideration. c) Choice of business, direction, market strategy, product mix, etc.

4) Tactical decision: a) Tactical decision relate to the implementation of strategic decisions. It includes acquisition and organization of the resources, structuring of work and recruitment and training of staff. b) Short and medium term trends.

5) Operational decisions: a) Short-term decision relating to pricing, production levels. b) The main objective of operational decision is to ensure effective and efficient use of existing facilities and resources to carry out activities with in budget constraints.

6) Group decision : Decisions made by more than one member are called group decision The advantages of group decision are:-

1) Implementation of decision becomes easy.2) Reduce the amount of communication necessary to implement

the decision.3) Reduce the amount of co-ordination.

4) More solution are discussed in group situation.5) Involve many individuals, mare data and information

The disadvantages of group decision are:-1) Slower in arriving at solutions 2) Indecisive in the sense3) Decisions by compromising4) Highest-level individual can influence the group.5) Off factions and trying to win points.

Groups are best used in the following cases:-1) Accuracy is more important than speed2) The group is cohesive and works3) Co-ordinates facilitates 4) Requires a number of skills and experiences

Decision –making can be improved by:-a) Higher – status individuals do not dominate the group.b) Criticism should be accepted in a fruitful way.c) Coaching the group to avoid personalized conflicts.d) Making the group uneven in number ( preferably five or

seven )e) Including specialist from various areas.f) Explaining clearly the objectives.

Steps in the Process of the Decision –Making:a) Recognition of the problem - Problem finding is a matter of identifying

variance from objective and defining their causes.1) Organization’s performance decline 2) Results of the organization do not meet the planned objectives.3) Results of the organization are not comparable those of other

similar organizations.

b) Search for information and alternatives- Issue of what can be done about failure to meet profit objectives may be due to higher costs or due to lower selling price or booth.

1) Reduce raw material costs through better purchasing.2) Producing own raw material.3) Efficient machinery.4) Hiring cheaper labour

.c) Choice: The decision maker must chose one, risk and benefits that

could flow from each alternative.

d) Implementation: The decision maker communicates the decision made organization support for it and assigns resources top implement it. Feedback systems are installed to ensure that decision is being implemented.

Decision-Making through MIS

Management Information System may be utilized in the decision-making process because information is the essential ingredient of decision making. Through MIS, information can be provide to the decision-maker to improve the decision making ability . By far the greatest number of business decisions is repetitive and routine. The decision of the organization may be programmed through the proper design of MIS. The computer automatically makes the decision in following steps:-

a) Analyze the problem and design a decision rule.b) Program the decision rule.c) Design the input and output of the computer information system.

Three stages of the decision- making process and the role MIS:-a) Identifying the problem: Sales analysis report helps managers in

identifying the status of sales performances .b) Identification of various feasible solution:c) Choice of best solution among alternatives: Financial and marketing

ratio, calculation of net present value , internal rate of return, payback period.

Functional Information Areas:The functional of a typical business enterprise can be broadly classified into

the following categories:-1) Production Function 2) Sales and Marketing Function3) Finance Function4) Human Resources Management Function5) Information Function

- Order Processing - Forecasting - Price - Process Schedule - Recruitment

- Inventory control - Funds Mana- - sales order - Material Management - Selection

Management Information System

Accounting

Finance Marketing Manufacturing

Human Resource

- Accounts receivable -gement - Forecasting - Purchase - Training

- Accounts Payable - Auditing - Billing - Shipping - Development

- Payroll - Distribution - Plant and Machinery - Payroll

- General Ledger - Product Promot- - Research and Devel- - Evaluation

- Purchase - ion, etc. –opment, etc. - Retirements, etc.

- Billing

Each of these function has an information system composed multiple sub-systems functional areas in detail.

Finance and Accounting Information systems: Accounting information systems collects all the data relevant to accounting provides complete documentation and comprehensive information, and also provides a basis for enterprises – wide control and Planning. Information provided by accounting transaction processed is used primarily by marketing or other functional group and produce financial statement such as balance sheet and profit and loss account. These systems also produce forecast of future conditions such as projected financial statement and financial budgets. There are two types of accounting systems:-

a) These systems include transaction processing systems such as order processing, inventory control, accounts receivable, accounts payroll and general ledger systems.

b) Management accounting systems:- Cost accounting report, projected financial statement, analytical report comparing actual to forecasted performance.

The important accounting information systems are discussed below:-1) Order processing: Processing of customer orders and producing

invoices and provides information to inventory control systems.2) Inventory control: Inventory control systems help in minimizing

investment in inventory and thereby in reducing inventory carrying cost.

3) Accounts receivable Systems: Record amounts owed by customers and helps in controlling the outstanding and timely collection.

4) Accounts Payable: Record purchase made from suppliers and prepares cheques in payment.

5) Payroll: Receive and maintain data from employee time cards and other works records. They produce salary cheques.

6) General Ledger: Produce trial balance, profit and loss account, balance sheet and various income and expense statement, financial ratio analysis, budgetary control, credit management, aging analysis of debtors.

Financial Information SystemThe finance functions of a business is responsible for obtaining money

needed by the business and planning the use of that money from the sale of goods and services, from investment made by the business and from banks and other institutions that lend money to the business.

Data Inputs I S Output

Source OF Financial Data The Source of financial Data as above the diagram

a) Transaction Data: The Transactions of revenues and expenses incurred from each functional area.

b) Forecasting Data: To compare the actual transition with the anticipated as per the forecast.

c) Financial Intelligence Data: Banks, Government, Stock market, etc.

d) Strategic Plans : The organization’s goal is to increase profits by 30 percent

Output Of financial Information Systems The Outputs of financial information systems:

a) Forecasting: Prepare immediate and long term predictions of the activity of the organization for 10 or more year.

Transaction data

Forecasting Data

Financial Intelligence Data

Strategic Plans

Forecast

Funds Management

Audit and Control

Other Areas

External Environment

b) Fund Management: Determine the flow of funds into and out of the organization. Long term funds may be raised from various long-term sources like equity, debenture, etc. Short-term funds may be raised from banks, creditors, etc.

c) Audit and Control: Audit and control is an inspection that determines whether things are working according to the guidelines.

Financial Decisions Financial decision relate to effective utilization of funds. Various financial

decisions are given below:-a) Estimation of requirement of funds: A business must make a

financial forecast.b) Capital structure Decision: A business must select on optimum

mix of different sources of capital.c) Capital Budgeting Decision: Evaluating the profitability and

financial impact of proposed capital expenditure.d) Dividend Decision: Distribute all profits or retain them or

distribute a portion.e) Tax Management: Tax planning is done to reduce the outflow of

cash resources by way of tax.f) Current Asset Management: Sufficient funds are not invested in

current assets, the organization may become illiquid, idle current assets do not earn any profit.

Marketing Information System

Sources of Marketing Information:The sources of marketing information are:-

a) Transaction Data: Reports on order, sales, prices, inventory level, receivables, etc.

b) Marketing Research Data: Consumer related data that can support marketing decision, personal interviews, surveys, questionnaire, etc.

c) Marketing Intelligence Data: Information about competitor’s strategy.

d) Strategic Plan: Types of products which the company plans to supply to the market.

Output of marketing information System:a) Plan and control the performances of specific

products, product lines, and brands.b) Place Planning: How the product is distributed across

geographical area.c) Price planning: Cost-based pricing and mark-up for

profit.d) Promotion Planning: Advertising and Promotione) Budget and Sales Forecasting: Short-range for

forecasting and Long-range forecasting. Sales for periods up to one yr and sales period for one yr or more into the future.

Manufacture System

Transaction Data

Marketing Research data

Marketing Intelligence Data

Strategic Plans

Product Plan

Place Plan

Price Plan

Promotion Plan

Budget and sales Forecast

Other Areas

External Environment

Sources Of Manufacturing Dataa) Production Data: Data gathered and processed on

production.b) Inventory Data: Inventories of raw Material, work-in-

process and finished goods.c) Vendor Data: Maintained by Purchase department.d) Marketing Data: Marketing specifies what is required.e) Labour, Union, and Engineering Data: Awareness

About labour market, labour union and personal performance.

f) External Environment Data: Knowledge of raw material prices and Availability of labour.

Output of manufacturing Information System: a) Product Design: Computer Aided Design (CAD) and Computer Aided

Engineering (CAE) are used in product design. It also used CAPP, MRP and CAM may be used to help Manufacture products.

Production data

Inventory Data

Vendor Data

Marketing Data

Labour /Union/Engineering Data

Environment Data

Product design

Facility Design

Production

Quality Control and Quality Assurance

Other Areas

External Environment

b) Facility Design: It Includes plant location and Layout.c) Production: Planning, directing and controlling of the material

supply .The task of production planning is accomplished through:-1) Routing: Route over which each piece is to travel2) Scheduling: When each operation in a production process is to be

carried out.

There are two basic types of production methods:1) Job Shop Production: each order taken by the firm is considered

to be a job.2) Process Production: Goods are produced at a mass scale for

general consumption.

Human Resources Information System:

Sources of Human Resource Information System Dataa) Transactional Data: This data includes employee number, name,

qualification, experience, data of joining, etcb) Functional Plans: Future planning for recruitment, job

assignment, etc is made.c) External Data: The availability of personal, trends in the labour

force, competitor’s market offering to the employees, Government and labour laws, etc.

Transaction Data

Functional Plans

External Data

OrganizationalResources Planning

Organizational Management

Payroll and Administration

Other areas

External Environment

Output of Human Resources Information System:a) Organizational Resources Planning: It provides proper

acquisition and allocation of the resources of manpower to the required areas of work.

b) Organizational Management: The train and develop the employees of training and development needs of personals at all levels. Development of suitable training programmes and employees development programmes.

c) Payroll and Administration: Distribution of employees’ wages, salaries, incentive payments and fringe benefits and compensation.

Integration of Business FunctionsThe various business functions should be integrated to bring about

‘onenesses’ in the organizational activities. Each activity needs to be directed towards achievement of common objectives laid down for the organization as a whole. The information systems are becoming more and more multifunctional and are transgressing the organizational boundaries of various business functions. Conceptual classifications of information system are design to emphasize the many different roles of information systems. In practice, these roles are integrated into composite or cross functional information systems that provide a variety of functions. Thus, Most Information systems are designed to produce information and support decision-making for various levels of management and business function, as well as to do record keeping and transaction processing. For example, sales order/order processing, which is an accounting information system and sales analysis which is a marketing information system. However, these two are typically integrated in a business.

ERP systems are designed for applications that encompass a large portion of the business. They integrated many common applications into one system.

An Enterprise Resource Planning (ERP) system is an information system which supports several areas of a business by combining a number of applications with a single database that stores all the data used by the applications.

DECISION SUPPORT SYSTEMS

INTRODUCTION:Unstructured decisions have no pre-established decision procedure because:-

a) Such decisions are too infrequent to justify the organizational cost of preparing a decision procedure.

b) The decision process is not understood well enough.c) Decision process is too changeable to allow pre-established decision procedure.

Decision support systems use computers to facilitate the decision-making process of unstructured decisions. These system are not designed to replace managerial judgment but to support and help managers to react quickly to changing needs and are used by managers for generating tactical information and performing ‘what-if-analysis’ for the managers. DSS uses information from multiple sources in an organization which is presented in summarized forms such as graphs and charts to assist top management to take strategic decision.

What Is A DSS Decision support system may be defined as a “what-if” approach that uses an information system to assist management in formulating policies and projecting the likely consequences of decisions.DSS results from adding external data sources, accounting and statistical models, and interactive query capabilities. Thus, DSS is an effective blend of human intelligence, information technology and software which interact closely to solve complex problems.

Comparison between MIS and DSS.

MIS DSS

1) MIS focuses on structured tasks and routine decision 1) DSS focuses on semi-structured tasks which require managerial judgment2) MIS places emphasis on data storage 2) DSS places emphasis on data manipulation.3) In MIS, data is often accessed indirectly by managers 3) In DSS, data is accessed directly managers4) MIS puts reliance on computers expert 4) DSS puts reliance on manager’s own direcr5) In MIS, access to data requires a wait for managers’ turn 5) In DSS, access to computer and data is direct6) In MIS, the manager does not completely understand the 6) In DSS, manager knows the decision environment nature of the decision 7) MIS places emphasis on efficiency of decision 7) DSS places emphasis on effectiveness of decision 8) MIS provides tactical information to top management 8) DSS provides strategic information to take decisions9) MIS are regular and recurring 9) The need for DSS cab be irregular

Comparison between EDP, MIS and DSS

Characteristics EDP MIS DOSData Volume Large Medium LowProcessing High Average SmallType of processing Routine Unique to Unique to Organization Individual user Equipments conventional Interactive HumaneMode of Process Batch On-line Real timeInput-output Card, print Terminal, Speech, touch Devices mouse Location of data Centralized Distributed individualSymbolic operation None Medium Large Application Program Query MenuPeople Replace Retain little changeManagement impact Lower Medium HigherMan vs Machine Machine Co-operative Man Supreme SupremeTime frame Past Past / Present/ Present FutureTypical state Passive/ Reactive/ Active/ Reactive active creativeIdentifies with Problem Solution Opportunity

Types of Decision Support Systemsa) Database – oriented DSS: - This data can be analyzed with the use of On-Line

Analytical Processing (OLAP) and Data mining. Data mining refers to extracting of “mining” knowledge from large amounts data. The following types of information can be obtained from data mining:-

1) Associations: - Correlation relationships among a large set of data items. For example when, milks purchased, bread is purchased 70 per cent of the time. Place milk and bread within close proximity.

2) Sequence: - Sequence or time series analysis methods relate events in time. Uniform are purchased by students within one month of declaration of results 90 per cent of the time.

3) Classification and prediction:- Insurance claims currently under process are most likely fraudulent

4) Clustering: - Clustering is the process of grouping a set of physical and abstract objects into classes of similar objects from class on time.

On-line Analytical Processing (OLAP):- On-line Analytical Processing (OLAP) refers to graphical software tools that provide complex analysis of data stored in a database”what if”.

b) Model-oriented DSS – Simulation, Maximizing or optimizing scenarios.

DSS Goals/ Features and Application:- The features/goals of DSS may be termed as follows:-

a) DSSs support unstructured and semi-structured decisions:-

b) DSS should be flexible:- It should have Flexibility of use in various unexpected decision situations.

c) DSSs emphasis is on small single models that are easily understood and implemented. The decision support systems are usually built and operated by users who may not be computer professionals.

Defining and Formulating Defining and Formulating the Problemthe Problem

Framing the problem into Framing the problem into DSS modelDSS model

Obtaining results with the Obtaining results with the use of modeluse of model

Problem ReformulationProblem Reformulation

Advantages of DSS Following are the advantages of DSS:-

a) As DSS reduces the time and effort in collecting and analysis of data .b) As modeling and forecasting is made easy DSS, managers get more insight into the

business processes.c) As DSS makes it possible to explain to others the basis for arriving at a particular

conclusion.d) DSS facilitates the quicker analysis of data for unstructured decision-making, which

improves the speed of response in unexpected decision-making situation.e) DSS facilities quicker analysis of variances and expectations.f) DSS facilities in-depth analysis of data.g) DSS may be constructed to support one-time decisions.

The other advantages of DSS are:-1) Cost Savings.2) Improves managerial effectiveness.3) Extensive range of support to management.4) Support of individual/groups5) Graphical display6) Designed and run by managers, incorporated data and models.7) Contains a database drawn from internal files / external environment.8) Concerned a with small area of managerial activity or a small part of a large

problem.9) It permits the managers to test the probable results of alternative solutions.10) It specializes in easy to use software that utilizes natural languages.11) It employs interactive processing that permits rapid response times.12) Use and control rest with the user and not with the information management

department.13) These are flexible and adaptable to changes in the external environment or in the

decision maker’s style.14) They support and not replace the managerial judgment.15) They improve the effectiveness of the decisions instead of efficiency with which the

decisions are made.

Limitations of DSSa) DSSs cannot replace human decision-making talents such as creativity, imagination

or intuition.b) DSSs are generally designed to be narrow in scope of application.c) Language and command interfaces are not sophisticated enough to allow for natural

language processing.d) The power of a DSS is limited by the computer system upon which it is running.

Components of a DSSa) User – Most of the unstructured decision are made at the strategic or top

level of management. It is not necessary that user of DSS should have through knowledge of computer.

b) Databases – A database is a collection of data that is organized in such a way that it corresponds to the needs and structure of an organization.

c) DSS software – DSS software must be easy to operate for extracting relevant information without much effort. Spreadsheet software such a Lotus 1-2-3 and MS Excel provides such facilities.

d) Model base – Statistical Models, mean, median, mode, deviation, scatter plot. Optimization models, forecasting models and sensitivity analysis models are some of the common models which from a model base.Optimization: Non – Linear programmingSensitivity analysis models: Sensitivity analysis models study the impact of discrete changes in parameters of optimal solution.

DatabaseModel base

DSS Software

user

The Tools of Decision Support Systems Tools are the building blocks of the DSS, e.g., Electronic spread sheets, 4 GLS, RDBMS, etc. Decision support tools may involve the following:a) Material requirement planning (MRP) - MRP is a method for ordering and maintaining

material in stock.b) Linear Programming c) Queuing theoryd) Descriptive statistics e) Correlation analysisf) Variance analysisg) Network analysis – Network analysis is a pictorial tool for identifying and sequencing

tasks.h) Transportation problemi) Maximum flow or distancej) Dynamic Programming – Dynamic programming is a tool to ensure that appropriate

course of action and decision of top level management are being followed by managers at operational level.

k) Regression analysisl) Multi-dimensional scaling m) Markov processes – Markov processes are tools used to determine global probabilities

associated with the occurrences of events

Architecture of Decision Support Systems:

TPSData

DataBase

MISData

ExternalData Model Base

Consisting of forecasting, evaluation and resources allocation models

Organize the dataCollected

Structure the models

Simulate performance

Find the best alternative

FinancialForecasts

FinancialReports

Recommended Investments

Decision Support Systems In Accounting Systems:a) Budgeting Models – Sale budget, production budget manpower budget, expense

budget, etc. The system is used to observe whether the performance of the organization for a particular period is as per the budget. The use of spread sheet, row totals and column totals, Bar charts, line charts, etc.

b) Cost Analysis model – Cost analysis is undertaken to control the costs and the value of inventory. DSS models offer up-to-date cost information and tools for studying the behaviors of various elements of cost. These models also offer leads for the identifying opportunities for reduction of cost in the process of improving profitability.

c) Break-even analysis model – This model is used for determining the volume of business activity at which there is no profit or loss

Break-even point = Fixed cost / Revenue per unit – Variable cost per unit

d) Evaluation of Funds and Investment – Investment decision refers to the selection of assets in which funds should be invested.

e) Cash and funds flow models for budgeting – DSS models help in estimating the demand and availability of funds for each plan period.

Chapter – 6

Executive information Systems (E I S)Executive are generally the managers at the top-level of the organizational hierarchy.In any organization, executives perform the following activities:-

- Strategic planning: which means defining goals of the organization.- Defining policies and general guidelines to achieve the defined goals.- Make unstructured decisions.

The decision made by executives are mostly unstructured for which information requirements are generally for processed and summarized data from a variety of sources. For strategic planning, executives need considerable external data in aggregate from. The characteristics of information required for strategic planning are:-

1) Information required is largely from external sources.2) Scope of information required is very large, such as capabilities of collected of

competitors and their market share.3) The information required for strategic planning cannot be collected on regular basis.4) The information collected for strategic planning cannot be specified in advance.5) The information is required in aggregate form.6) The time horizon of information required if future.7) Accuracy of information may not be very high. Low level of accuracy may serve

the purpose of strategic planning.8) The information is infrequently used.9) The Information required for strategic planning may be very complex and may

include many variables.Executive information systems are those information systems that lay maore emphasis on presentation of summary information, integration of external and information, exception reporting techniques and establish link with the basic operations of the enterprises. These information systems are used by top-level managers. Executive information systems help in:

a) Identifying options.b) Evaluation of alternative courses of actionc) Making informed choices regarding business operations.d) Consolidation and summarizing adapt collected from both external and internal

sources.

Executive information systems are installed to reduce the information overload on executives. The executive information systems also provide drill-down facilities to the executive. With this facility, the executives may see the details behind exceptions, if necessary. With this, the executive may analyze the reasons for exceptions, deviation, etc. For example, in a five star hotel chain executive may be supplied room occupancy rate for on day-to-day basis. In case the executives notice a low occupancy rate for a certain hotel, they may question the general manager of that hotel to submit reasons for low occupancy.

EIS enables presenting of reports in standard formats and this often involves graphics.

EISs extend and support the capabilities of executives, permitting them to make sense of their environments. EISs are management information systems tailored to the strategic information needs of top management. Top executive get the information they need from many sources including letters, memos, periodicals and report produced manually as well as by computer systems. Other sources of executive information are meetings. Telephone calls and social activities. Thus much of a top executive’s information comes from non-computer sources. EISs combine many of the features of MIS and DSS but their focus is on meeting the strategic information needs of top management. EIS can provide following types of access to the executive:-

a) Status access – Ready access to an automated set of reports that give the current status of various operation or projects.

b) Personal analysis – Ability to look through certain data files and manipulate the figures, reporting them in various ways.

c) Model-based analysis – Ability to invoke specific calculation models with ready access to the required data. This may involve making simple projections, or adding data from external sources.

An executive information system may be considered as a specialized type of decision support systems in which there is :-

1) Limited and relatively simple use 2) Very high priority when used3) Considerable backup organizational support4) Constantly changing requirements.

It can be concluded that:

EISs are not normally used to arrive t decision, but are used simply to review information in different formats and structures to aid in the decision-making process.

Feature of Executive Information System:a) Executive information systems are tailored to individual executive users.b) Executive information systems extract, filter, compress and track critical data.c) They provide on-line status access, trend analysis, exception reporting and ‘drill-

down” capabilities. This allows executive to reach information in further detail.d) They access and integrated a board range of internal and external data.e) They are user-friendly and require minimal or no training to use.f) These are used directly by executives without intermediaries.g) They are present graphical, tabular, and/or textual information.h) EISs contain statistical analysis tools.i) EISs have the ability to solve business problems.

Distinction between EIS and ESSThough the terms EIS and ESS are used interchangeably, yet they differ in the sense that:

1) ESSs are EIS with additional capabilities.2) ESSs support electronic communications ( e.g. E-mail conferencing and word

processing)3) ESSs Provide data analysis capabilities ( e.g. spread sheets, query languages and

DSSs)4) ESSs include personal productivity tools ( e.g. electronic calendars, tickler files and

rolodex).

Activities Supported by EISExecutive information systems support the following activities:-

a) Decision-making at executive levelb) Strategic planning including long-range planning.c) Monitoring of internal and external events and resources.d) Crisis managemente) Staffing and labour relations.

Benefits of Executive Information SystemsFollowing are the benefits of EIS:

1) Executive information systems help the executives in identifying options, evaluation of alternative course of action and in making informed choices.

2) Executive information systems provide data in a very aggregate form. Moreover, executives are also provided with an option to drill-down and see the details, if necessary.

3) Executive information systems provide fast access to up-to-date information which is concise.

4) Executive information systems provide exception reports.5) Executive information systems can provide personalized information and analysis.6) Executive information systems enable presentation of information in standard

formats7) Executive information systems are very flexible in use.8) Executive information systems offer an interactive and user-friendly operating

environment.9) Executive information systems extend and support the capabilities of executives

and permit them to make sense of their environment.10) Executive information systems provide timely and concise information about the

performance of the organization. This helps the executives in grasping business conditions very quickly.

11) Executive information systems extend the life of information. The information delivered on apiece of paper. Information stored in electronic form can be retrieved on demand.

Limitations of Executive Information SystemsFollowing are limitations of EIS:

1) As the scope of information required by executives is very wide, it may not always be economically feasible to collect all such information. Moreover, much of the data required for strategic planning cannot be collected on regular basis, and much of it cannot be specified in advance.

2) It is very difficult and very often almost impossible to make the cost benefit analysis of using an executive information system. Thus it becomes very difficult to measure the performances of these systems.

3) As executive information systems use much of data generated from external sources, these systems are expensive.

Comparison between Decision Support Systems and Executive Information System

Feature Decision support Executive Information System System

Expertise required Detailed training for problem Brief training for specific Solving required by analytical use required by executive And technical managers

Communication with Simplified processes, which can simplified processesthe computer have familiar problem complexity for rapid responses but not language complexity

Data management large quantities of data is extracted Specified or summarizedSoftware and investigated from different data is extracted and Internal and external sources reviewed from defined Sources

Business planning Tabulation and statistical programs Tabulation, summarizationSoftware with consolidation and summari- and consolidation in -zation capabilities, operations simplified formats research methods Algorithm Capability Mathematical, statistics, forecasting Simplified statistics and , time series analysis, and other forecasting techniques

Communications Ability to collect data from diverse Ability to collect data Sources and transmit to others from specified files and Some external sources

Personal Computer Micro-mainframe connections for Connection to extractUsage large consolidations and maintena- database, some external -nce of database, plus local area sources and some network interaction subordinate equipment.

Output Is produced in tabular or graphic Is produced in tabular or graphic

from for presentation from for review

Components of Executive Information SystemAn executive information system consists of following three major components:-

a) Database management systemb) Inquiry and analysis functions: Inquiry and analysis functions are a variety of

programmed subroutines and arithmetic and statistical packages that are used for analyzing and manipulating the information organized in the database.

c) Graphical and report-writing functions - Graphical and report-writing functions provide the capability to view the data from several angles.

Chapter 7

Knowledge-Based SystemKnowledge-based systems store and utilize effectively large amount of knowledge. Knowledge-based systems are a sub-set of artificial intelligence. Knowledge is the information about a specific domain needed by a computer program to enable it to exhibit intelligent behavior with regard to a specific problem. The most popular form of a knowledge-based system is an expert system.

Expert systemsThe expert system aim at formalizing expertise and make it available for repetitive type of business decision. The expert system have been developed for the purpose of passing expertise from those with the knowledge to those who need the knowledge in a convenient and easily accessed manner. By asking questions and by comparing the user’s answers with the information stored in extensive expert knowledge database, expert system provide intelligent, knowledgeable answers. Expert systems provide information to managers in the form of expert advice. Expert system is a subject of artificial intelligence. Expert system can be described as programs that help the computer to make decision in a similar way as an expert in specific domain, a particular subject area, of interest. Expert System are used in making unstructured decisions.

Applications Area of Expert SystemExpert systems can be used in several areas of an organization, such as:-Accounting and Finance

- In selecting forecasting models.- In providing tax advice- In credit authorization decisions.

Marketing- In assisting with marketing times.- In establishing sales quotas- In responding to customer’s inquiries.- In determining rebate policies.

Manufacturing- In determining whether process is running correctly.- In analyzing quality and providing corrective actions.- In product designing and layout.- In maintaining facilities

Others- In assessing project proposals.- In education trainees.- In recommending acquisition strategies.

- In evaluation performance.- Inferring situating descriptions from observations.- Inferring likely consequences of given situations.- Inferring system malfunctions for observations.- Configuring objects under constraints - Developing plans to achieve goals.- Prescribing remedies for malfunctioning.- Executing a plan to administer a prescribed remedy, etc.

Advantage of Expert SystemsExpert systems provide various advantages. The major advantage of using expert-systems are:-

a) Planning b) Decision-makingc) Monitoringd) Diagnosise) Training f) Extensive use of expertiseg) Timely responseh) Consistent solutionsi) Reliabilityj) Increase the capabilities of other computerized systemsk) Expert systems have an ability to work to work with incomplete or uncertain

information

Disadvantages of Expert systemsIn Spite of various advantages, expert systems have some drawbacks also. These are:-

- Expert System are not generalized experts or problem solvers.- Expert Systems may take a longer time in solving the problem as compared

to experts.- Some problems may be too tough to be solved by an Expert System.- It is always not possible to extract knowledge from an expert.- Expert Systems take longer development time and are expensive.- It is very difficult to make the cost-benefit analysis of using an Expert

System.- Knowledge to be captured may not always be readily available.- The experts may have different approaches to a given situation.- Means are not available to check whether conclusions of expert system are

reasonable or correct.

Components of Expert SystemComponents of an expert system can be classified into following categories:-

a) User interface – User interface is used by the users to input questions and answers.b) Knowledge-base – Knowledge base is structured storage of specific facts about the

expert area and the rules that will be used by an expert system to make decision based on those facts.

c) Inference Engine - Processing in an expert system consists of matching facts and rules, determining the sequence of question presented to the user and making a conclusion. Inference engine matches the problem symptoms with the knowledge in the knowledge-base and generates recommendations. Thus, inference engine analyzes rules in the knowledge base to draw conclusions.

InputQuestion and answer of user

ProcessingMatching of user questions and answers to information in knowledge baseDetermining sequence of questions presented to the userMaking a conclusion

OutputRecommendations

StorageKnowledge- base

Rules Contained In Knowledge BaseRule 1: If the applicant has required education, then hire applicant.Rule 2: If the applicant has required experience, then hire applicant .Rule 3: If applicant has degree in commerce, then applicant has required education.Rule 4: If applicant has degree in non-commerce field and has an MBA, then applicant has

required education.Rule 5: If applicant has two or more years’ experience in accounts job then applicant has

required experience.Rule 6: If applicant has five or more years experience in non-accounts job then applicant

has required experience.

The user enters the applicant’s details from the application such as applicant’s name, education, experience, etc. The inference engine uses the rules contained in knowledge base to evaluate the data entered by the user.

Chapter 8OFFICE AUTOATION SYSTEM AND VIRTUAL OFFICE

Office Automation SystemThe main objective of office automation system is the centrality, consistency, communication and control of the information. Office automation is the integration of computer, telecommunications and office equipment technologies to improve the execution of business functions through increasing the productivity, effectiveness, and working conditions of office support staff. Office automation system are concerned with handling, controlling and distribution of the information of the organization .office automation refers to the use of computer and communication technology to perform various office functions. The various activities in an office can be classified into two categories:-

1) Activities performed by clerical staff ( typists, secretaries, clerk etc.) e.g. typing, mailing, retrieving documents, scheduling of meetings and conferences, etc.

2) Activities performed by managers e.g., controlling performance; production of information such as report, memos or messages and conferencing.

Office automation facilitates both types of activities.Office automation tools consist of devices such as fact photocopiers, phones and computer-based office automation systems. Some of these applications are discussed below:-

1) Word Processing: Word processing refers to preparation of documents such as letters, reports, memos, etc., with the assistance of a computer.

2) Electronic filling: Electronic filling facilities the filling of incoming and outgoing mail and documents on a magnetic media.

3) Electronic mail: Electronic mail consists of following facilities:- Send messages electronically to other users with in the same organization. Automatic logging of copies. Retains messages for specified periods. Authenticates the messages with a signature. Notes time of dispatch. Provides unlimited ‘mail-boxes’. Sets up precedence and priorities. Provides a level of security and privacy.

4) Automating daily calendars5) Groupware6) Desktop publishing7) Image processing.8) Presentation graphics9) Computer graphics10) Voice processing11) Facsimile12) Teleconferencing

Advantages of Office automation systemsThe advantages of office automation system are the following:

1) They provide more time to managers to concentrate on their basic job.2) They improve the quality of work in terms of content, thoroughness, timeliness and

accuracy.3) They speed up specific functions and thereby increase the quantity of clerical

output.4) They use electronics to absorb the normal growth of functions.5) They reduce the time spent on input capture and creation.6) They help in eliminating routine, boring, or less desirable tasks.7) They help in reducing administrative detail overhead.8) They help in reducing the traveling expenses for discussion, meetings, e.g.,

teleconferencing.9) They co-ordinate and integrate office tasks.10) They enable more cost-effective and time-effective communications.11) They reduce the turnaround time by moving information quickly and efficiently to

the people who need it. Turnaround time is the time interval between preparation and receipt of messages or documents.

12) They increase the productivity of office workers at all levels.

Limitations of Office automationa) Cost of automated office hardware is very high.b) Office automation can disrupt traditional office work roles and work environments.c) Office automation may lead to security problems. For example, an inefficient and

unauthorized use of e-mail, fax, etc. may adversely affect the office’s productivity.

Virtual OfficeVirtual office involves the use of computer by employers at home to telecommute and to collaborate with other employees. Employees may receive work through electronic messaging information sharing system.Advantages of Virtual office are:-

a) Virtual offices reduce the office rental cost and office maintenance costs.b) Virtual offices result in reduction of equipment costs because telecommuters can

share the equipment.c) The essence of virtual office is that office work can be performed virtually at any

geographical location.d) Virtual office enables office work to be performed by physically handicapped

persons.

Chapter 9

CLIENT / SERVER ARCHITECTURE

Client / Server Architecture In a client / server network, end user micro computer workstations are the client. They are interconnected by local area network, and share application processing with LAN servers which also manage the network. Thus, client / server system is a form of computer network that divides processing functions between clients (computers that sue services) and servers (computers that provide services). Networked computer systems allow end users to communicate electronically and share the use of hardware, software and data resources.

The Traditional Computing ModelsThe Traditional Computing models are:-

a) Mainframe computers – Mainframe computers work in time sharing, multi-user, and Multiprogramming environment. In mainframe, all intelligence is within the central host computer. Users establish a communication link with the host computer through a dump terminal; personal computer or Unix Workstations and send information to the host via keyboard. Limitations of mainframe software architecture are:

1) They are Stable and monolithic.2) Do not easily support (GUI) graphical user interface.3) Access is limited to locally clustered resources.4) Cost thousand times more than a PC.5) Only pre configured application works. Mainframe computing is not a true

network because there is no sharing of information and capabilities.b) Personal computers – Local area network (LAN), which enables sharing of

data peripherals.c) File sharing Structure – Personal computer communications software often

provide file transfer facility by which the user can send data from a file at PC to the other computer and Vice Versa.

Client Server ModelIn the client server approach, the processing task is divided into parts, between server and workstation. The global tasks are handled by the server whereas workstation handles all the local tasks. This result in reduction of network traffic and thereby making the system fast and easy to use. Moreover, this approach allows multiple users to access the same data simultaneously sharing of other resources, e.g. print servers and spooling software.

Client/Server ComputingThe steps involved in client/server computing are as follows:-

1) A user enters a request on the client computer.2) The client software determines what data is needed and send a request for

the data over the LAN to the database server.3) The server’s database software then locates the requested data and send it

back to the client over the LAN.4) The client software processes the data and presents the results of processing

through the user interface. To the user.

The other reasons for changing to client/server computing are:- a) Direct access to required data.b) Highly Flexible as it is relatively easy to add capabilities.c) Easy access to the required information, irrespective of physical location of datad) Improving the flow of information.e) End-users are ensured of better services.f) Cost savings because investment in mainframe can be avoided.

Implementation Examples of Client/Server Technology To process credit card purchases. For money transfers For credit checks For inquiring customer accounts For on-line shopping E-business On-line banking Call-centre Telecommunication based on intranet technology. Intranet application

Benefits of Client/Server technology1) Easier access to corporate’s internal and external data.2) It reduces costs of processing dramatically.3) The maintenance cost of programs is low.4) Client/server technology gives control to users of their own application at their own

locations.5) Easy to add capabilities for more users.6) Reduces the operating costs of information systems department. Client /server

database management systems are less expensive than mainframe DBMSs.7) The server is free of user-interface and increases the efficiency.

Limitations of Client/Server Technologya) It is difficult to write software that divides processing among clients and servers.b) At times when too many users want service simultaneously, a specific server can

get bogged down quickly.

c) Personal computers with independent processing power are more difficult to coordinate and administer on a network.

d) Client/server technology requires more diverse technical support, as it allows a company to use hardware and software from many different vendors.

e) The server is usually the central location for critical data adequate physical security and operational security measures need to be taken to ensure data safety. It becomes difficult to ensure security in distributed environment.

f) Administration of distributed equipment can be much more expensive.g) Failure of one server can render a large client/server system unavailable.

Approaches to client/server Any application is comprised of six different activities, which include the following:-

1) User interface2) Presentation logic3) Application logic4) Data request and result acceptance.5) Physical data management6) Data integrity

These activities allow users to :-a) Easy data access b) Fast and efficient computingc) Quick application responsed) Makes workers more productivee) Saves time being in time sharing mode.

The major resources required for client-server computing process are:a) Display devicesb) User interface devicesc) Peripheral devicesd) Data storage devicese) Application Softwaref) Operating systemg) Data base management system

Components of Client/serverThe key components of client/server architecture are:-

a) Client : There are three types of clients, these are:-1) Non-Graphical user Interface: ATMs, cell phone, fax machines, and robots.2) Graphical User Interface (GUI): It involves interaction models like pull

down menus in windows environment.3) Object Oriented User Interface(OOUI)

b) Server: On a local area network, server is a computer that executes administrative software that controls access to the network and its resources such as printers and disk drives.

c) Middleware: Middleware is a software that resides between two or more types of softwares and translates information between them. Middleware is the distributed software needed to allow clients and servers to interact. Middleware performs the following function:-

1) API (MAPI) and Open Database Connectivity (ODBC) module.2) SOL access Group’s (SAG) 3) Remote Data Access (RDA)4) RPC

Middleware is composed by four layers, these are:- Service Layer: It carries coded Instructions and data from software

applications to the Back-end Processing layer from encapsulating network-routing instructions.

Back-end Processing Layer: It consists of a processor that manipulates and encapsulates data sent to the network

Network Operating system layer: It adds additional instructions to ensure that the transport layer transfers data packets to the assigned recipient efficiently and correctly.

Transport Layer: It moves data from one place ( source) to another ( destination )

d) Network: Network is a group of computers and associated devices that are connected by communication facilities, e.g. LAN, WAN.

Mainframe(Root system)

Server # 1 Server # 2 Server # 4

PC: User # 1 PC: User # 2 PC: User # 3

LAN

Client/server ArchitectureIn a client-server approach, the various components of an application are distributed over the enterprise. The various components of an application which can be distributed are:-

a) Presentation component: Presentation component is the application interface. It shows how the application appears to the user.

b) Applications (Processing) logic component: The processing logic is created by the business rules of the application.

c) Data Management Component: The data management component consists of the storage and management of the data needed by the application.

On the basis of division of these three processing components between the server and client, the following client/server computing models may be implemented:-

1) Distributed Presentation: In distributed presentation, all the three processing components reside on the server, but the presentation logic is divided between the client and the server.

2) Remote Presentation: In remote presentation, application logic component and data management component reside on the server, but the presentation component resides on the client.

3) Distribution Logic: In distribution logic, data management component resides on the server and the presentation component resides on the client. The application logic component is distributed between the client and the server.

4) Remote data management: In the remote data management, database management component resides on the server while presentation component and application logic components reside on the client.

5) Distributed database: In the distributed database, all three processing components reside on the client, but the database management component is distributed between the client and the server.

The abovementioned distribution of processing components gave rise to the ideas of ‘fat’ clients and ‘thin’ clients.

a) Fat clients: Fat clients have large storage and processing power in which all the three components of an application can be processed, e.g., file server or database servers. In this, client handles presentation and processing functions and server manages data and access to data. It is commonly known as “2-Tier” system.

b) Thin clients: Thin clients have limited processing capability with no local storage. Thin clients can handle only the presentation component.

c) Fat servers: In client/server architecture, fat server is a server machine that performs most of the processing with little or none performed by the client. Application logic and data reside on the server and the presentation layers are handled by the client. They are commonly known as “3-Tier” system. Example of fat server is web server.

Client/Server SecurityTo increase the security, an information system auditor should ensure the following control techniques, these are:

1) Use only read only media.2) Disable the floppy drive to secure access to data and application.3) Avoid unauthorized access by using diskless workstations.4) Having a key or password-protected configuration and set up.5) Requiring password to boot.6) Requiring password to mount removable media.7) Use network monitoring devices to know about the clients to monitor the activities

continuously and to maintain devices.8) Access should only be given to those who need specified data.9) Computer network should have real-time intrusion detection system to test for

legitimate traffic and network usage.10) Use error detection and correction software when transmitting data.11) Design user interfaces that prevent the input of invalid data.12) Backup data regularly.13) Use data encryption techniques to store and transmit data.14) To check data integrity on servers, an error correction code (ECC) capable memory

controller may be installed.15) Reduce the risk of someone stealing proprietary information. Control physical

security with staff access cards, alarms, surveillance cameras, etc.16) Each user can carry personalized smart card which can be used to store data and

personal information of the user, rather than entrusting it to the network storage.17) Application controls may be used where users will be allowed to access only the

functions in the system that are required to performs their duties.

Client/Server Risks and IssuesThe major drawback of client/server model is the inherent risk involved in transmission from centralized system ( mainframe). Risk can be classified into following four categories, these are:

a) Technological Risks: Will the new system work? How soon will it become obsolete? Will the existing controls work? Will the new requirements put excessive performance constraints on the

system? Will existing software i.e., network operating system, network interfaces,

protocols, the application software will be compatible with the new system?

b) Operational Risks: Will the required performance of the new system be achieved? Will the chosen software be able to grow or adapt to the changing needs of

business? Will the staff require training regarding security practices?

c) Economic Risks

d) Political Risks: Will the management, professional and end users be satisfied? Will the turnover among staff be low enough to allow continuity? Are enough people available? If the answer to these questions is “no”, further investigation should be

undertaken to assess risk potential.

Chapter 10

System’s Acquisition, Software Development and Testing

Hardware Evaluation Factor Maximum possible points

Proposal I

Proposal II

ProposalIII

Performance in terms of speed, capacity

Cost Including cost of maintenance and operation

Reliability in terms of error control and diagnostic feature

Availability in terms of lead time

Compatibility With existing hardware and software and compatibility with hardware and software provided by competing suppliers

Expansion in terms of upgrading by acquiring “add on” units

Connectivity with wide and local area networks of different types of computers and peripherals

Environmental requirements in terms of its electrical power consumption, air-conditioning etc.

Availability of system and application software to support the hardware

Performance record

Quality of services

Training

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System Design Phase is followed by the fourth phase of system development life cycle i.e., System acquisition and software Development.

While acquiring the system, the following factors must be kept in mind:-

a) Equipment selected should not be approaching obsolescence.b) The equipment selected should not have the danger of becoming locked into

a particular vendor’s equipment. E.g. HCLc) A third factor in equipment selection is a avoiding a dead-end system. A

system should be selected that will be enhanced by the vendor in future.d) A computer system selected should be part of family of computers to ensure

that upward compatibility would be available.e) It should be ensured that hardware is computer-friendly i.e., safe,

comfortable and easy to use. All these factors which have been listed in table 9.1 should be considered while acquiring the system.

Financial factors, After the decision to go ahead with the acquisition has been taken the next question is whether to rent, purchase or lease.

a) The Rental Option: - The user agrees to a monthly payment. The rental option is generally for the short-term use of a system, may be from 1 to 12 months. The advantages of using rental option are:-

1) Insurance, maintenance and other expenses are included in rental charges.2) It provides financial leverage to the user. The decision to purchase a system

can be delayed until adequate financing is available, until a new generation of equipment is a available, or until such time as the organization wishes, for whatever reasons.

3) Rental charges are expenses and are tax deductible.4) Rental option provides more flexibility as it makes the risk of technological

obsolescence.

The disadvantages of using rental option are:-1) Rental option is very expensive.2) As rental options are generally for a shorter period, the user not provided enough

security to plan on the continued availability of the system.

b) The Lease Option: - A lease is a commitment to use a system for a specific time, generally from three to seven years. The leasing option has following advantages:-

1) No financing is required. The risk of system obsolescence is shifted to the lessor.

2) Lease charges are lower as compared to rental charges and are also tax-deductible.

3) Lease may be written to show higher payments in early years to reflect the decline in the value of the system.

4) Lease may or may not include maintenance or installation costs or providing a replacement system in an emergency

5) Short-term leasing option enables the user to upgrade to amore powerful system at the end of the lease.

However, the leasing option has following drawbacks:-1) The user loses residual rights to the system at the end of the lease period, unless

specifically provided for the lease agreement.2) The lease period, once entered into, cannot be terminated without a heavy penalty.3) The user may not be able to exchange the leased system for another system.4) The rent & interest user is at loss when interest rates are reduced.

c) The Purchase Option – The ownership of computers through outright purchase is the most common method of computer acquisition. Under this option, the organization takes title to the equipment. The advantages of purchasing option are:-

1) The system can be modified at the will of the organization.2) It involves lower continuing cash disbursements than those for a leased

system due to cash saving from depreciation and investment allowance.3) It is a cheap option as compared to other option.

However, the draw backs of purchasing option are:-1) Initial high investment.2) Insurance and Maintenance expenses are borne by the user organization.3) High overall risks as the organization is locked into the system it purchases.

Changing to a different computer system is more difficult under this option.

Software Acquisition: Make or BuyThe work performed by a computer system depends, to a large extent, on the software resources available in an organization. Software is the brain, heart and soul of any computer system. Software needs can be defined under three broad categories:-

a) System Software :- System software consists of1) Operating System: MS-DOS, UNIX, Windows95, etc.2) Translation software: OBOL, FORTRAN, C++ and PASCAL.

b) Application software:- Application software is the collection of programs that actually process data to generate information for various application

c) Interaction Query Software:- These software are also called end user languages and 4GLs and they enable the user to develop limited application for their use without much of technical expertise.

Planning for software acquisition involves two basic decision:- Make or buy decision and Selection of specific software

Advantages and disadvantages of Ready-made Application Software Main advantages of using ready-made application software are summarized below:-

a) Low Cost :- As ready-made software packages are developed for general market.

b) Faster procurement – software package developed in-house takes a very long time to develop.

c) Rapid implementation – Ready-made software package can be implemented immediately after their purchase.

d) High quality – As the ready-made software package typically has a large customer-base, developers continuously invest in refinement and testing.

e) Low risk f) Fast updationg) Longer life cycle – Ready-made software packages have longer life cycle because

there is usually for more user experience behind the software.h) Better control – Ready-made software packages are better from the point of control

and audit because people associated with the in house development of software may have interest in keeping separate exit routes in the software.

But ready-made software packages have certain disadvantages as will, which are:-1) The ready-made software packages may not fit into the specific

requirements of the applications.2) Frequent changes in ready-made software are either expensive or not

possible.3) Non-availability of software package that meets the specific requirements of

the business process.

Sources of Ready-made Software

The major source of ready-made information systems software packages are computer manufacturers, computer retailers, computer service centre, time-sharing companies, system integrators and independent consultant.

Step Involved in Selection of a Computer SystemComputer system consists of hardware and application software. The various steps involved in selection of a computer systems are:-

a) Requirement analysis- Which Hardware/ Software, printers etc.b) System specifications.c) Request for proposal- RFP should include the following:-

1) Complete statement of system specifications, programming language, price range, terms and timeframe.

2) Request for Vendor’s responsibilities for conversion, training and maintenance.

3) Warranties and terms of license or contractual obligations.4) Request for financial statement of vendors.5) Size of staff available for support system.

d) Evaluation and Validation- In this phase, the proposal received from various vendors are evaluated and the vendor who is best suited to the user’s needs is identified.

e) Vendor selection- The vendor with the best combination of repution, reliability, service record, training, delivery time, price, etc. is selected. The sources available to check on vendors include the following

1) Software/ Hardware houses2) Universities3) Trade associations4) Users5) Publication and Journal6) Published directories7) Consultants8) Industry Contracts.

f) Post-installation review- After the system is installed, a system evaluation is mae to determine how closely the new system conforms to plans.