Information System has been defined in so many ways by different scholar and sources. To define it simply it is an integration of various components that are coordinated together to enable managers to perform their functions more effectively. They are used to enhance decision-making in the organization, from structured, and semi-structured to non-structured decisions.
The components of an information system are hardware, software, people, procedure, networking, and database. The most common type of information system includes transaction processing, management information system, strategic systems, ERP, systems, and knowledge, among other categories.
Table of Contents
Components of information systems
For a computer-based type of system, it should at least have the following elements or components for it to function well.
- Hardware: this includes the physical tangible part of the computer which includes; the CPU, memory, input, and output devices.
- Software: includes the operating system, database management systems, utility, and, application programs that are used on the computer hardware.
- People: they are the users who interact with the system, from system administrators to basic end users of the system.
- Procedures: it is the set of rules that the system follows to accomplish the objectives that it was meant to do.
- Database/Data: These are facts that are used on software that is installed in the hardware to manage different parts of an organization’s work. Data is the raw working material that is processed on the computer for decision-making.
- Networking infrastructure: Most current systems are online (on the cloud) and used over many geographical locations. Networking components create a link between other components that are in remote locations.
Classifications of Management Information System
Information systems are classified into 2 main broad classes. Classification according to the functional area that the system is used and then each of these is further categorized with management level.
1. Classification according to functional areas
The management system can be classified according to the functional area that they are used or the function that they play in the organization.
a) Human resource systems
These systems are used to attract, develop, maintain, and evaluate employees of the company. At the strategic level, the systems are used to identify future manpower that the company will require depending on the strategic plan of the company.
The systems are used to compensate, allocate the employees to the suitable position and analyze the recruitment of a new workforce.
When it comes to the operational level, they are used to track the recruitment and placement of new employees in the company.
b) Production and manufacturing systems
They are used for the real production of the product that the company deals with. They can be systems that are used to monitor engine manufacturing in a motor company or the stages of new software development etc.
At a strategic level, the systems are used to decide on issues such as which new product to be introduced in the future, where to locate the next branch of the company, and all other strategic-related issues.
Tactical systems can be used to deal with issues such as deciding how many products should be produced within a given period. They are also used to monitor the raw materials use or the cost of production among other middle manager-level responsibilities.
For the operational, it involves the real monitoring of the product which is in the line of production at any given time to ensure that the product meets the set standards.
c) Finance and accounting information systems
These systems are used for finance to manage company assets and their capitalization. At the strategic level, they are used to manage the long-term investment of the company and future prediction of the company’s financial status.
At the tactical level, they are used to control the financial resources of the company, and also they can be used to prepare short-term budgets.
While at the operational level finance and account information system are used to track the flow of cash through transactions carried out by issuing receipts.
d) Sale and marketing information systems
Marketing is the main section of any company’s success. These systems are used to facilitate the operations that are carried out in the sale and marketing of all products.
At the strategic level, they are used to plan for new product lines by assessing any opportunities available for future expansion. They are also used to forecast the sale of the product.
For tactical they are used for price analysis to ensure prices are competitive. Also, they are used to determine the type of product campaign or advertisement that are best for each specific product.
At the operational level, they are used for contacting customers, determining the customer taste and preferences for products processing sales orders, etc.
2. Classification according to management level
These are the systems that are used for the day-to-day transactions of the organization. They can include registration of the new customer, issuing of invoices, withdrawals from a bank, etc.
Most of these activities are routine operations that have a well-defined structured way of doing them. The required type of decision is structured.
b) Management information system
They are used by middle managers to make decisions to run the organization. They facilitate the core responsibility of managers such as co-ordinate, planning, controlling, and decision making.
Managers can also use the system for day-to-day administrative roles. They can be used to compile periodical reports such as monthly or weekly.
c) Knowledge information system
These systems are used to design a new product and to manage the organization’s knowledge. The systems are also used to come up with a new product, redesign the existing one or just do some simple improvements depending on the customer’s taste.
d) Strategic management system
They are mostly used by top management for strategic planning. They deal with decisions that are not structured. This is because most top management deals with the prediction of what will happen in the future.
They can be used to predict the sales of goods in five years to come, which social group to target with the new or current product etc. An example of a strategic system is an executive support system.
Characteristics of a good management information system
1. Accurate reports generation
One major characteristic of a good information system is the types of reports it generates. A good system should provide summarized reports at each managerial level to ensure fast decision-making and hence improve efficiency.
The report can be anything from a general report to a drill-down report for more details.
2. System flexibility
Since it is expected that things will change during the period that the system will be in use it should be designed to accommodate the changes that may occur.
It should be flexible to allow new business rules that may come up due to either internal or external forces. For example, if it is a financial management system and the government changes the tax rate the system should be able to accommodate that.
3. Cost of acquisition and maintenance of information system
The cost of the information system is one major component that ensures that a system is good enough. The value of the system should be higher compared to the cost that is used to develop or acquire the system.
The value can be calculated from the cost that will be cut down when the system is used, and how will it increase the speed of operation which will lead to serving more customers and hence more returns.
The maintenance cost should also be factored in since it will be a recurrent expense.
4. Standards and compliance with policies
A good management system should comply with both the internal (organization) set standards as while and external standards like government policies. If it is a finance/accounting system it should comply with set tax standards such as VAT and audit requirements.
5. User-friendly system
The system should be simple to learn or at least it has a gentle learning curve. It should offer Graphic User Interface which is more user friendly.
This will improve the usability of the system and its adaptability to the organization and also reduce the resistance to change to the new system.
Again a good system should be accompanied by a user manual or even the company that is providing the system can offer training for the user.
6. System administrative and support
The tools that the system will be using should be provided and be simple to use. The tools can include security and access level issues.
The system administrator should be able to set passwords for users and set the standards and rules that the password must meet. The system should meet the organization’s ICT and security policy requirements.
Apart from the security, the system should offer backup and recovery. This will reduce the risk of data loss in case the system clash. The backup created should be used to recover back and the system continues with minimum interruption.
The system should also offer room for upgrades from the old system to the new one so that it becomes easy to deal with bugs that are identified later after the system is implemented and in use.