Learning Objectives

By the end of this chapter, you will be able to:

  • Briefly describe the evolution of information systems in business.
  • Define and provide an example of a Transaction Processing System (TPS).
  • Define and provide an example of a Management Information System (MIS).
  • Define and provide an example of a Decision Support System (DSS).

The Evolution of Information Systems

Information systems have evolved significantly over the past several decades. Early systems were focused on automating basic, repetitive tasks. As technology became more powerful and less expensive, systems evolved to provide managers with better information for decision-making, and eventually to become strategic tools for gaining a competitive advantage.

Types of Information Systems

Organizations use different types of information systems to serve different levels and functions. A common way to classify them is based on the organizational level they support.

1. Transaction Processing Systems (TPS)

  • Purpose: To capture and process the data from the day-to-day, routine business transactions.
  • Users: Frontline staff (e.g., cashiers, bank tellers).
  • Characteristics: High volume of transactions, focus on speed and accuracy.
  • Example: A Point-of-Sale (POS) system in a retail store that records each sale and updates inventory.

2. Management Information Systems (MIS)

  • Purpose: To provide managers with summarized reports from the data captured by the TPS. MIS are used for monitoring and controlling the business.
  • Users: Mid-level managers.
  • Characteristics: Provides routine summary reports (e.g., weekly sales reports), focuses on past and present data.
  • Example: A report that summarizes the total weekly sales for each department in a store. This helps the store manager identify which departments are performing well.

3. Decision Support Systems (DSS)

  • Purpose: To support non-routine, complex decision-making. A DSS provides an interactive environment where managers can analyze data and model different scenarios.
  • Users: Managers and business analysts.
  • Characteristics: Interactive, allows for “what-if” analysis, uses both internal and external data.
  • Example: A system that allows a manager to see how a change in product price might affect sales and profitability.

Summary

Information systems have evolved from simple transaction processors to sophisticated decision-making tools. The main types of systems reflect this evolution. Transaction Processing Systems (TPS) handle the daily operational data. Management Information Systems (MIS) summarize this data into reports for managers. Decision Support Systems (DSS) provide interactive tools for analyzing data and modeling complex, non-routine decisions.

Key Takeaways

  • Information systems have evolved from automating tasks to supporting decisions.
  • TPS are the operational backbone, capturing daily transaction data.
  • MIS provide summary reports for middle managers.
  • DSS are interactive systems that help with complex, non-routine decisions.

Discussion Questions

  1. What is the relationship between a TPS and an MIS? How do they depend on each other?
  2. Provide an example of a “what-if” analysis that a manager might perform with a DSS.
  3. As a student, what information systems do you interact with at your university?