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A TUTORIAL from

Management Information System by

James A. O'Brien and George M. Marakas

McGraw-Hill

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What is a System?What is a System?

• A set of interrelated components

• With a clearly defined boundary

• Working together

• To achieve a common set of objectives

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What is an Information System?What is an Information System?

• An organized combination of…• People• Hardware and software• Communication networks• Data resources• Policies and procedures

• This system…• Stores, retrieves, transforms, and disseminates

information in an organization

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Information TechnologiesInformation Technologies

• Information Systems• All the components and resources necessary to

deliver information and functions to the organization

• Could be paper based

• Information Technologies• Hardware, software, networking, data

management

• Our focus will be on computer-based information systems (CBIS)

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Fundamental Roles of IS in BusinessFundamental Roles of IS in Business

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Types of Information SystemsTypes of Information Systems

• Operations Support Systems• Efficiently process business transactions• Control industrial processes• Support communication and collaboration• Update corporate databases

• Management Support Systems• Provide information as reports and displays• Give direct computer support to managers during

decision-making

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Purposes of Information SystemsPurposes of Information Systems

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Operations Support SystemsOperations Support Systems

• What do they do?• Efficiently process business transactions• Control industrial processes• Support communications and collaboration• Update corporate databases

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Types of Operations Support SystemsTypes of Operations Support Systems

• Transaction Processing Systems• Record and process business transactions• Examples: sales processing, inventory systems,

accounting systems

• Process Control Systems• Monitor and control physical processes• Example: using sensors to monitor chemical

processes in a petroleum refinery

• Enterprise Collaboration Systems• Enhance team and workgroup communication• Examples: email, video conferencing

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Two Ways to Process TransactionsTwo Ways to Process Transactions

• Batch Processing• Accumulate transactions over time and process

periodically• Example: a bank processes all checks received in

a batch at night

• Online Processing• Process transactions immediately• Example: a bank processes an ATM withdrawal

immediately

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Management Support SystemsManagement Support Systems

• What do they do?• Provide information and support for effective

decision making by managers• Management information systems• Decision support systems• Executive information systems

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Types of Management Support SystemsTypes of Management Support Systems

• Management Information Systems (MIS)• Reports and displays • Example: daily sales analysis reports

• Decision Support Systems (DSS)• Interactive and ad hoc support• Example: a what-if analysis to determine where

to spend advertising dollars

• Executive Information Systems (EIS)• Critical information for executives and managers• Example: easy access to actions of competitors

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Other Information SystemsOther Information Systems

• Strategic Information Systems• Help get a strategic advantage over customer• Examples: shipment tracking, e-commerce Web

systems

• Functional Business Systems• Focus on operational and managerial applications

of basic business functions• Examples: accounting, finance, or marketing

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Developing IS SolutionsDeveloping IS Solutions

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Data Versus InformationData Versus Information

• Data are raw facts about physical phenomena or business transactions

• Information is data that has been converted into meaningful and useful context for end users

• Examples:• Sales data is names, quantities, and dollar

amounts• Sales information is amount of sales by product

type, sales territory, or salesperson

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IS ActivitiesIS Activities

• Input of data resources• Data entry activities

• Processing of data into information• Calculations, comparisons, sorting, and so on

• Output of information products• Messages, reports, forms, graphic images

• Storage of data resources• Data elements and databases

• Control of system performance• Monitoring and evaluating feedback

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• To succeed, a business must develop strategies to counter these forces…• Rivalry of competitors within its industry

• New entrants into an industry and its markets

• Substitute products that may capture market share

• Bargaining power of customers

• Bargaining power of suppliers

Competitive ForcesCompetitive Forces

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Competitive Forces and StrategiesCompetitive Forces and Strategies

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• Cost Leadership• Become low-cost producers• Help suppliers or customers reduce costs• Increase cost to competitors

• Example: Priceline uses online seller bidding so the buyer sets the price

• Differentiation Strategy• Differentiate a firm’s products from its

competitors’• Focus on a particular segment or niche of market

• Example: Moen uses online customer design

Five Competitive StrategiesFive Competitive Strategies

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• Innovation Strategy• Unique products, services, or markets• Radical changes to business processes

• Example: Amazon’s online, full-service customer systems

• Growth Strategy• Expand company’s capacity to produce• Expand into global markets• Diversify into new products or services

• Example: Wal-Mart’s merchandise ordering via global satellite tracking

Competitive Strategies (continued)Competitive Strategies (continued)

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• Alliance Strategy• Establish linkages and alliances with customers,

suppliers, competitors, consultants, and other companies

• Includes mergers, acquisitions, joint ventures, virtual companies

• Example: Wal-Mart uses automatic inventory replenishment by supplier

Competitive Strategies (continued)Competitive Strategies (continued)

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• These strategies are not mutually exclusive• Organizations use one, some, or all• A given activity could fall into one or more

categories of competitive strategy

• Not everything innovative serves to differentiate one organization from another• Likewise, not everything that differentiates

organizations is necessarily innovative

Using Competitive StrategiesUsing Competitive Strategies

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• Lock in Customers and Suppliers• Deter them from switching to competitors

• Build in Switching Costs• Make customers and suppliers dependent on the

use of innovative IS

• Erect Barriers to Entry• Discourage or delay other companies from

entering the market• Increase the technology or investment needed to

enter

Other Competitive StrategiesOther Competitive Strategies

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• Build Strategic IT Capabilities• Take advantage of strategic opportunities when

they arise• Improve efficiency of business practices

• Leverage Investment in IT• Develop products and service that would not be

possible without a strong IT capability

Other Competitive StrategiesOther Competitive Strategies

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• Called BRP or simply Reengineering• Fundamental rethinking and radical redesign of

business processes• Seeks to achieve improvements in cost, quality,

speed, and service

• Potential payback is high, but so is risk of disruption and failure

• Organizational redesign approaches are an important enabler of reengineering• Includes use of IT, process teams, case managers

Reengineering Business ProcessesReengineering Business Processes

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BPR Versus Business ImprovementBPR Versus Business Improvement

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• IT plays a major role in reengineering most business processes• Can substantially increase process efficiencies

• Improves communication

• Facilitates collaboration

The Role of Information TechnologyThe Role of Information Technology

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• Many processes are reengineered with…• Enterprise resource planning software

• Web-enabled electronic business and commerce systems

A Cross-Functional ProcessA Cross-Functional Process

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• IT that supports this process…• CRM systems using intranets and the Internet• Supplier-managed inventory systems using the

Internet and extranets• Cross-functional ERP software to integrate

manufacturing, distribution, finance, and human resource processes

• Customer-accessible e-commerce websites for order entry, status checking, payment, and service

• Customer, product, and order status databases accessed via intranets and extranets

Reengineering Order ManagementReengineering Order Management

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• Agility is the ability to prosper• In rapidly changing, continually fragmenting

global markets• By selling high-quality, high-performance,

customer-configured products and services• By using Internet technologies

• An agile company profits in spite of• Broad product ranges• Short model lifetimes• Individualized products• Arbitrary lot sizes

Becoming an Agile CompanyBecoming an Agile Company

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How IT Helps a Company be AgileHow IT Helps a Company be Agile

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Network ConceptsNetwork Concepts

• A network is an interconnected or interrelated chain, group, or system

• The number of possible connections on a network is N(N–1) or N2 –N• N = number of nodes (points of connection)• Example: 10 computers on a network = 10(10–1)

= 10x9 = 90 possible connections

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Internet Networking TechnologiesInternet Networking Technologies

• Internet networking technologies are being used as technology platform• Web browser suites• HTML Web page editors• Network management software• Firewalls

• Being applied in Internet, intranet, and extranet applications

• Reinforces previous move toward client/server networks based on open-systems architecture

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MiddlewareMiddleware

• Middleware• A general term for any programming that

mediates between two separate programs• Allows a particular database to access other

databases without custom programming

• Commonly known as the “plumbing” of an information system • It routes data and information between back-end

data sources and end user applications• An essential component of any IT infrastructure

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The Internet RevolutionThe Internet Revolution

• The Internet has become a global information superhighway• Millions of smaller, private networks operating

independent of, or in harmony with, each other• 10 servers in 1991 to over 46 million today• Sustained growth in excess of 1 million servers

per month• No central computer system• No governing body• Based on common standards

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Business Use of the InternetBusiness Use of the Internet

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The Role of IntranetsThe Role of Intranets

• Many companies have sophisticated and widespread intranets, offering…• Detailed data retrieval• Collaboration• Personalized customer profiles• Links to the Internet

• Intranets use Internet technologies• Web browsers and servers• TCP/IP network protocols• HTML publishing and databases

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IntranetsIntranets

• Intranets are protected by…• Passwords• Encryption• Firewalls

• Customers, suppliers, and other business partners can access an intranet via extranet links

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Business Value of IntranetsBusiness Value of Intranets

• Intranets support• Communications and collaboration

• Business operations and management

• Web publishing

• Intranet portal management

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Intranets as Information PortalsIntranets as Information Portals

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ExtranetsExtranets

• Network links that use Internet technologies to connect the intranet of a business to the intranets of another

• Virtual Private Networks• Direct private network links, or private secure

Internet links between companies

• Unsecured Extranet• Link between a company and others via the

Internet, relying on encryption of sensitive data and firewall security systems

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Extranet ConnectivityExtranet Connectivity

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Business Value of ExtranetsBusiness Value of Extranets

• Web browser technology makes customer and supplier access to intranets easier and faster

• Another way to build and strengthen strategic relationships

• Enables and improves collaboration between a business, customers, and partners

• Facilitates online, interactive product development and marketing

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Types of Communications NetworksTypes of Communications Networks

• Primary types of communications networks• Wide Area • Local Area • Virtual Private • Client/Server• Peer-to-peer

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Wide Area Network (WAN)Wide Area Network (WAN)

• Telecommunication network that covers a large geographic area

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Local Area Network (LAN)Local Area Network (LAN)

• Connects computers within a limited physical area, such as an office, classroom, or building

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Virtual Private Networks (VPN)Virtual Private Networks (VPN)

• Used to establish secure intranets and extranets• The Internet is the main backbone network• Relies on network firewalls, encryption, and

other security features to build a “pipe” through the Internet

• Creates a private network without the high cost of a separate proprietary connection

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Virtual Private NetworkVirtual Private Network

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• A virtual company uses IT to link…• People• Organizations• Assets• Ideas

• Inter-enterprise information systems link…• Customers• Suppliers• Subcontractors• Competitors

Creating a Virtual CompanyCreating a Virtual Company

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A Virtual CompanyA Virtual Company

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• Basic business strategies• Share information and risk with alliance partners• Link complimentary core competencies• Reduce concept-to-cash time through sharing• Increase facilities and market coverage• Gain access to new markets and share market or

customer loyalty• Migrate from selling products to selling solutions

Virtual Company StrategiesVirtual Company Strategies

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Logical Data ElementsLogical Data Elements

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Logical Data ElementsLogical Data Elements

• Character• A single alphabetic, numeric, or other symbol

• Field or data item• Represents an attribute (characteristic or quality)

of some entity (object, person, place, event)• Examples: salary, job title

• Record• Grouping of all the fields used to describe the

attributes of an entity• Example: payroll record with name, SSN, pay rate

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Logical Data ElementsLogical Data Elements

• File or table• A group of related records

• Database• An integrated collection of logically related

data elements

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Electric Utility DatabaseElectric Utility Database

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Database StructuresDatabase Structures

• Common database structures…• Hierarchical

• Network

• Relational

• Object-oriented

• Multi-dimensional

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Hierarchical StructureHierarchical Structure

• Early DBMS structure• Records arranged in tree-like structure• Relationships are one-to-many

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Network StructureNetwork Structure

• Used in some mainframe DBMS packages• Many-to-many relationships

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Relational StructureRelational Structure

• Most widely used structure• Data elements are stored in tables• Row represents a record; column is a field• Can relate data in one file with data in another,

if both files share a common data element

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Relational OperationsRelational Operations

• Select• Create a subset of records that meet a stated

criterion• Example: employees earning more than $30,000

• Join• Combine two or more tables temporarily• Looks like one big table

• Project• Create a subset of columns in a table

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Multidimensional StructureMultidimensional Structure

• Variation of relational model• Uses multidimensional structures to

organize data

• Data elements are viewed as being in cubes

• Popular for analytical databases that support Online Analytical Processing (OLAP)

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Multidimensional ModelMultidimensional Model

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Object-Oriented StructureObject-Oriented Structure

• An object consists of• Data values describing the attributes of an entity• Operations that can be performed on the data

• Encapsulation• Combine data and operations

• Inheritance• New objects can be created by replicating some

or all of the characteristics of parent objects

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Object-Oriented StructureObject-Oriented Structure

Source: Adapted from Ivar Jacobsen, Maria Ericsson, and Ageneta Jacobsen, The Object Advantage: Business Process Reengineering with Object Technology (New York: ACM Press, 1995), p. 65. Copyright @ 1995, Association for Computing Machinery. By permission.

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Object-Oriented StructureObject-Oriented Structure

• Used in object-oriented database management systems (OODBMS)

• Supports complex data types more efficiently than relational databases• Examples: graphic images, video clips,

web pages

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Evaluation of Database StructuresEvaluation of Database Structures

• Hierarchical• Works for structured, routine transactions• Can’t handle many-to-many relationship

• Network• More flexible than hierarchical• Unable to handle ad hoc requests

• Relational• Easily responds to ad hoc requests• Easier to work with and maintain• Not as efficient/quick as hierarchical or network

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Database DevelopmentDatabase Development

• Database Administrator (DBA)• In charge of enterprise database development

• Improves the integrity and security of organizational databases

• Uses Data Definition Language (DDL) to develop and specify data contents, relationships, and structure

• Stores these specifications in a data dictionary or a metadata repository

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Data DictionaryData Dictionary

• A data dictionary• Contains data about data (metadata)• Relies on specialized software component to

manage a database of data definitions

• It contains information on..• The names and descriptions of all types of data

records and their interrelationships• Requirements for end users’ access and use of

application programs• Database maintenance• Security

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Entity Relationship DiagramEntity Relationship Diagram