An information system is a combination of processes, hardware, trained personnel, software, infrastructure and standards that are designed to create, modify, store, manage and distribute information to suggest new business strategies and new products. It leads to efficient work practices and effective communication to make better decisions in an organization. There has been a significant evolution of Information System function over the past few decades.
The evolution of Information System function can be summarized as follows:
|1950 – 1960||1960 – 1970||1970 – 1980||1980 – 1990||1990 – 2000||2000 – Present|
|Data Processing||Management Reporting||Decision Support||Executive Support||Knowledge Management||E-Business|
|Collects, stores, modifies and retrieve day-to-day transactions of an organization
|Pre-specified reports and displays to support business decision-making
Helps middle managers
|Interactive ad-hoc support for the decision-making process
Helps senior managers
|Provide both internal and external information relevant to the strategic goals of the organization
|Supports the creation, organization and dissemination of business knowledge
Help available enterprise wide
|Greater connectivity, higher level of integration across applications
Helps global e-business
Evolution of Information System Function
1950 – 1960: Electronic Data Processing, Transaction Processing System
During this period, the role of IS was mostly to perform activities like transaction processing, recordkeeping and accounting. IS was mainly used for electronic data processing (EDP).
EDP is described as the use of computers in recording, classifying, manipulating, and summarizing data. It is also called information processing or automatic data processing.
Transaction Processing System (TPS) was the first computerized system developed to process business data. TPS was mainly aimed at clerical staff of an organisation. The early TPS used batch processing data which was accumulated over a period and all transactions were processed afterward.
TPS collects, stores, modifies and retrieves day-to-day transactions of an organization. Usually, TPS computerize or automate an existing manual process to allow for faster processing, improved customer service and reduced clerical costs. Examples of outputs from TPS are cash deposits, automatic teller machine (ATM), payment order and accounting systems. TPS is also known as transaction processing or real-time processing.
1960 to 1970: Management Information Systems
During this era, the role of IS evolved from TPS to Management Information Systems (MIS). MIS process data into useful informative reports and provide managers with the tools to organize evaluate and efficiently manage departments within an organization. MIS delivers information in the form of displays and pre-specified reports to support business decision-making. Examples of output from MIS are cost trend, sales analysis and production performance reporting systems.
Usually, MIS generates three basic types of information which are:
- Detailed information reports typically confirm transaction-processing activities. A detailed Order Report is an example of a detailed report.
- Summary information establishes data into a format that an individual can review quickly and easily.
- Exception information report information by filtering data that is an exception inventory report. Exception reports help managers save time because they do not have to search through a detailed report for exceptions.
This period also marked the development when the focus of organizations shifted slowly from merely automating basic business processes to consolidating the control within the data processing function.
1970 to 1980: Decision Support Systems
In this era, a major advancement was an introduction of the personal computers (PC). With the introduction of PCs, there was the distribution of computing or processing power across the organization. IS function associated strongly with management rather than a technical approach in an organisation. The role focused on “interactive computer-based system” to aid decision-makers in solving problems.
This new role of information systems to provide interactive ad-hoc support for the decision-making process to managers and other business professionals is called Decision Support Systems (DSS). DSS serve the planning, management and operations level of an organization usually senior management.
DSS uses data from both internal and/or external sources. Internal sources of data might include inventory, sales, manufacturing or financial data from an organization’s database. External sources could include pricing, interest rates, population or trends. Managers use DSS to manipulate the data to help with decisions. Examples of DSS are projected revenue figures based on new product sales assumptions, product pricing and risk analysis systems.
1980 to 1990: Executive Information Systems
This period gave rise to departmental computing due to many organisations purchasing their own hardware and software to suit their departmental needs. Instead of waiting for indirect support of centralized corporate service department, employees could use their own resources to support their job requirements. This trend led to new challenges of data incompatibility, integrity and connectivity across different departments. Further, top executives were neither using DSS nor MIS hence executive information systems (EIS) or executive support systems (ESS) were developed.
EIS offers decision making facilities to executives through providing both internal and external information relevant to meeting the strategic goals of the organization. These are sometimes considered as a specific form of DSS. Examples of the EIS are systems for easy access to actions of all competitors, economic developments to support strategic planning and analysis of business performance.
1990 to 2000: Knowledge Management Systems
During this era, the rapid growth of the intranets, extranets, internet and other interconnected global networks dramatically changed the capabilities of IS in business. It became possible to circulate knowledge to different parts of the world irrespective of time and space.
This period also saw an emergence of enterprise resource planning (ERP) systems. ERP is an organization-specific form of a strategic information system that incorporates all components of an organisation including manufacturing, sales, resource management, human resource planning and marketing.
Moreover, there was a breakthrough in the development and application of artificial intelligence (AI) techniques to business information systems. Expert systems (ES) and knowledge management systems (KMS) interconnected to each other.
Expert systems (ES) are a computer system that mimics the decision-making ability of human experts. For example, systems making financial forecasts, diagnosing human illnesses and scheduling routes for delivery vehicles. Knowledge management system (KMS) is an IT system that stores and retrieves knowledge to support creation, organization and dissemination of business knowledge within the enterprise. Examples of KMS are feedback database and helpdesk systems.
ES uses data from Knowledge Management Systems to generate desirable information system’s output for example loan application approval system.
2000 – present: E-Business
The Internet and related technologies and applications changed the way businesses operate and people work. Information systems functions in this period are still the same just like 50 years ago doing records keeping, reporting management, transactions processing, support management and managing processes of the organization. It is used to support business process, decision making and competitive advantage.
The difference is greater connectivity across similar and dissimilar system components. There is great network infrastructure, higher level of integration of functions across applications and powerful machines with higher storage capacity. Many businesses use Internet technologies and web-enable business processes to create innovative e-business applications. E-business is simply conducting business process using the internet.