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Management Challenges Posed By the Role of Information Systems in Organisations
Throughout the 20th century, businesses thrived by making their production methods more and more efficient by improving production processes and developing better ways for making things. However, efficiency in production methods is no longer the only success factors in today’s business world. The excellence of 21st century lies in Information management i.e. having the right thing, on the right time, in the right quantity. Information is one of the most critical elements for the success of a business. Information has become one of the most significant assets for a business. The performance of a business depends on how it manages this asset like every other assets such as finance, humans, buildings, products, customers, etc. (Ward, 1995). The advancements of Information and Communication technology have provided various tools to effectively manage information. Using information and communication technologies, businesses and organizations nowadays rely largely on Information systems to store and manage and analyse data. Information system is a combination of various subsystems that coordinate with each other to collectively gather, store, manage, retrieve, distribute, and transfer information. Information systems help businesses to enhance their productivity by increasing the efficiency and value of business processes (Porter & Millar 1985).
Using information technology tools for managing information in conducting business is referred to as E-Business. E-business is a very wide concept comprising of different aspects of business transaction or transferring information by means of Internet. E-business can be classified into three categories. It can be within an organization which may include of various information systems such as Accounting Information System, Knowledge management system, Decision support system, Executive support system, etc. This type of communication technology is called Intranet. The standards used for Intranet are the same as for Internet communication. Accessibility to the Intranet is limited to organization-specific applications or web sites. These web sites and applications are protected against any unauthorized personal by firewalls and other security measures. The second category is involves business-to-business (B2B) communication conducted via Extranet. The Extranet integrates two Intranets which are inter-connected to each other via Internet, which facilitates two separate organizations to communicate and share confidential data. Thirdly category is the business-to-consumer (B2C) communication which occurs over the Internet. The business-to-consumers activity is the most prominent feature of e-business (Amor, 2001).
Purpose of Information Systems
The purpose of an information system is to empower its users. There is a wide difference in a simple database which stores data and return it to its users upon request. A database can be created in a way that manages and retrieves information in a sorted manner. This information can help make decision at various levels within an organization. Information system recognize that there are different levels of workers in an organization who have their specific duties and thus provides them information is different ways (Heinrich, 2002). Its purpose is to make sure that the users of the system are quickly able to access, comprehend, and react to the information provided to them. Wiseman (1985) mentions that the information system improves business functionality by automating some of the fundamental information procedures. He further mentions that the information system increases the effectiveness of the management by satisfying their information demands.
Information demands of businesses vary at different organizational levels. Various business functions at strategic, tactical and operational level have different types of subsystems of information system to serve their information demands. Some of the commonly used subsystems are as follows:
• Management Information Systems (MIS)
• Decision Support Systems (DSS)
• Knowledge Management Systems (KMS)
• Expert Systems (ES)
• Executive Information Systems (EIS)
• Transaction Processing Systems (TPS)
• Accounting Information Systems (AIS)
An important component of the information and communication technology and indeed one of its most momentous impacts is the provision and empowerment of electronic commerce. Electronic commerce is a process of buying and selling of products or services by means of electronic systems involving the Internet and e-mails (Graham 2008).
Commercial activities performed through e-commerce are either business-to-business (B2B) or business-to-consumers (B2C). E-commerce is a very cost-efficient mode of conducting business-to-consumers commercial activities (Graham 2008). E-commerce allows economic agents to reduce the transactional cost to a great extent (Porter 2001). Instead of internal hierarchies, it empowers the market itself to organize economic activities, which in turn increases the efficiency of the not just the business but across the entire commodity chain (Malone et al. 1987).
E-commerce creates a dimension of ‘spacelessness’ for economic activities which is one of its most distinctive features. Since the emergence of the Internet and increasing use of e-commerce, the imminent “death of distance” and creation of an ‘eight continent’ has been highlighted by researchers which is spurred by the increasing trade and commerce activities conducted electronically. They assert that constraints such as space and distance are becoming less significant for conducting economical activities (O’Brien 1992; Cairncross 1997). A large literature exits regarding various firms having used e-commerce to achieve competitive advantage by finding new and distant customers (for example see Daniel and Grimshaw 2002; Hamill and Gregory 1997; Kim and Mauborgne 1999; O’Keefe et al. 1998; Poon and Swatman 1999). Thus information systems also serve the purpose of communication with external business entities for trade and commerce activities.
Analysis of the problems of gathering data and analysing information
Information systems are a vital tool in achieving competitive advantage for a business by properly managing and analysing the information. However there are many security concerns that have being in the corporate agenda since its early usage. Today organizations are challenged by various and complex information security matters for handling distributed computer networks. Large amount of e-commerce activities, increased usage of internet, and ever changing technologies means new threats and risks and vulnerabilities for businesses as more and more business functions and procedures are becoming paperless. For this purpose, right controls are required within an organization to reduce the risks and ensure effective functioning of the information systems (Sushil & Leon, 2004).
Information Systems requires certain controls to be implemented for its smooth and effective functionality (Boczko, 2007). Information security managers can put these controls in place to ensure the system is secure against threats, exposure, and risks. (Gertz, 2003).
• A threat can be any possible unwanted occurrence or event that could harm the Accounting Information System or the business.
• The exposure is the possible loss of money that would occur as a result of the threat becoming a reality.
• The risk is the chance that the threat will become reality.
The controls that secure information systems against unfavourable outcomes are as follows:
• Preventive Controls
• Input Controls; Input controls checks upon the information that is being entered into the system.
• Processing Controls; Processing controls checks whether the data is processed properly after it is entered in to the system.
• Output Controls; The output controls ensure the completeness, validity, and accuracy of the data in various output mediums.
• Storage Controls; The storage controls ensures that the data in stored in such a manner that it cannot be tampered with.
• Files Controls; Files controls reduce the errors that occur due the improper storage of files.
• Hardware Security; Hardware security control is very important as any damage or harm to the hardware would mean that the failure of the system therefore the hardware for the information system must be kept in a secure place and with only reliable and relevant personal having access to it. Proper protection against high temperature or power failures and incidents should be made along with backup support.
• Standardization; Standardization controls involves usage of already laid down standards by the developers and operators for the methodology of the system development and operation respectively.
• Detective controls
• Testing; Testing is required to detect any problems occurring in the system and is thus performed before it is made operational. Testing can shows problems that can occur in the processing and any other errors. It is recommended that testing should be performed on a routine basis or after any new developments.
• Training; the training of the data processing staff ensures proper functioning of the system. The awareness of the staff also helps in pointing any defects in the system which could then be resolved.
• Operation Controls; Operation controls in Dean Plc are controls which record what computer systems and the employees have been doing. The operational controls can include tasks such as rotation of shifts, duty logs, manual of operating instructions, attendance controls and computer logs, etc. which can referred to whenever a problem is reported.
• Corrective controls
• When any problem in the system is detected, the management along with the help of Business Analysts and Expert can take relevant steps to correct the problems in the system.
• Certain procedure can be set for reoccurrence of the problems.
Apart from security concerns, there are several other challenges and issues associated with managing information systems. These are:
• Increase costs of a technological solution (developing, implementing and maintaining of the information technologies and systems)
• Reliability for certain processes (information systems require thorough testing before they could be used and are difficult prone to errors leading to potential losses)
• Software tools are not fixed but constantly evolving (information communication technology tools require timely upgrades to meet prevailing standards)
• Integrating digital and non-digital sales and production information (for e-commerce activities)
• Customer fear of personal information being used wrongly (privacy issues)
• Customer have high expectations regarding efficiency and real time responses
• Vulnerability to fraud and other crimes
• Higher employee training required to effectively using the information technology.
Another technological concern regarding information technology is the high volume of data generated from its use and its management. Organizations are required to create robust middleware application that are capable of handling the high amount of data and route it to the appropriate information systems in a timely manner (Ngain and Gunasekaran 2009).
Major sources of relevant data used for management information systems
As mentioned previously, businesses and organizations have a variety of information requirements. Executives at strategic level require information to help them with their planning and strategic decision making. They require a summarized form of information that can give an overview of the business. Middle management requires more detailed information in order to oversee and control business activities. Operational level employees need basic routine information to carry out their day to day duties. Therefore, businesses have several information systems working altogether at the same time. Different information systems have different sources of gathering data according their purpose. The following presents a list of most commonly used information system and their likely sources of data and users.
Executive Support Systems
Executive Support System helps the senior management of an organization in making strategic decisions. Executive Support Systems shows the status of all key business activities and involves large data analysis to help strategic decision making. Therefore, it is likely to have information from all the internal and external sources which is gathered, analysed and summarized for strategic decision making. Internal sources include information collected from other information systems. External information system can include external data gathered by e-commerce activities, external market analysis and etc.
Management Information Systems
Management information system is concerned with the summarized data of the business transactions that helps middle management to monitor business activities. Therefore it is likely to have information from all the internal sources such as transaction processing systems. It summarizes information into management reports.
Decision Support Systems are designed to assist middle and top level management in making decisions at uncertain conditions. It informs the user about the possible consequences of their decisions. It gathers internal information to analyse the available options and alternatives. It has a predefined set of logic which is part of its design. It uses complex tools spreadsheets, and databases for creating ‘what if’ models.
Knowledge Management Systems
Knowledge Management Systems are created to help organizations and businesses create and share information. The source of such information systems is typically the employees who create new knowledge through their own expertise and then share it along with others within an organization. This share pool of information is created to search new commercial opportunities. Examples of such information systems are web-portals and Intranet portals created by professional lawyers, management consultants and etc. these information systems categorize and distribute information efficiently among users. Information could be contained in any form and formats such as word processed documents, presentations, web pages and etc.
Transaction Processing Systems
Transaction Processing Systems are created to process daily repetitive activities and transaction in an automated efficient manner. The automation increases the accuracy of the information. A business usually involves several reoccurring transactions. Therefore, there are several Transaction Processing Systems such as Billing systems, Payroll systems, Inventory management systems, etc. The sources of these information systems are the employees at the operational level or the organization. Sometimes automated identifications are also used to input data to these systems such as Radio Frequency Identification.
Office Automation Systems
Office Automation Systems are tools that help improve the productivity of employees processing data. Such systems usually work as standalone programs and do not link data to other information systems. Examples of such systems include Microsoft Office Tools, and Computer Operating Systems.
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