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Unit 2.4

The Evolution and Types of Information Systems | IT 231 Notes

IT 231: IT and Application

Chapter 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

From simple automation to strategic tools.

  • Phase 1: Task Automation

    Early systems focused on automating basic, repetitive tasks like payroll and inventory tracking.

  • Phase 2: Management Reporting

    As tech grew, systems began providing managers with summarized information for better control.

  • Phase 3: Strategic Advantage

    Modern systems are strategic tools used to analyze data, model futures, and gain a competitive edge.

A Hierarchy of Systems

Different systems serve different organizational levels, often visualized as a pyramid.

🎯 Strategic Level

📊 Management Level

⚡ Operational Level

Decision Support Systems (DSS)
For non-routine, complex decisions.

Management Information Systems (MIS)
For monitoring, controlling, and reporting.

Transaction Processing Systems (TPS)
For day-to-day, routine operations.

1. Transaction Processing Systems (TPS) ⚡

Purpose: To capture and process data from day-to-day, routine business transactions.

  • Users: Frontline staff (e.g., cashiers, bank tellers).
  • Characteristics: High volume of transactions, focus on speed and accuracy.
  • Role: The operational backbone of the organization.

TPS in Action: Real-World Example

🛒 Point-of-Sale (POS) System

At a store like Bhat-Bhateni in Nepal:

  1. A customer buys groceries.
  2. The cashier scans each item's barcode.
  3. The TPS records the sale, updates inventory levels, and prints a receipt.
  4. This single transaction is the foundational data for the entire business.

2. Management Information Systems (MIS) 📊

Purpose: To provide managers with summarized reports from the data captured by the TPS.

  • Users: Mid-level managers.
  • Characteristics: Provides routine summary reports (e.g., weekly, monthly), focuses on past and present data.
  • Role: Monitoring and controlling the business.

MIS in Action: Building on TPS Data

📈 Weekly Sales Report

The manager of the Bhat-Bhateni branch uses an MIS that processes all the POS data from the week.

The MIS generates a report that answers questions like:

  • What were the total sales for the electronics department?
  • Which brand of noodles was the top seller this week?
  • How do this week's sales compare to last week's?

This helps the manager make informed decisions about stock and staffing.

3. Decision Support Systems (DSS) 🎯

Purpose: To support non-routine, complex decision-making with an interactive environment for data analysis and modeling.

  • Users: Senior managers and business analysts.
  • Characteristics: Interactive, allows for "what-if" analysis, uses both internal and external data.
  • Role: Strategic planning and problem-solving.

DSS in Action: Strategic "What-If" Analysis

🤔 New Product Pricing Model

A manager at a Nepali telecom company like Ncell or Nepal Telecom wants to launch a new data package.

They use a DSS to model scenarios:

  • "What if we price the package at Rs. 99? What is the projected revenue based on historical data?"
  • "What if a competitor lowers their price by 10%? How would that impact our market share?"

A DSS provides the tools to explore possibilities, not just report on the past.

Systems at a Glance: A Comparison

TPS

Level: Operational

Task: Record daily transactions

Example: ATM withdrawal

MIS

Level: Management

Task: Create summary reports

Example: Monthly sales summary

DSS

Level: Strategic

Task: Model "what-if" scenarios

Example: New product pricing model

How They Work Together

TPS, MIS, and DSS are not isolated. Data flows upwards, gaining value at each level.

TPS ➡️ MIS ➡️ DSS

  • ⚡ TPS collects the raw data.
  • 📊 MIS organizes and summarizes that data into reports.
  • 🎯 DSS uses the summarized data for deep analysis and future planning.

🔍 Key Takeaways

  • Information systems have evolved from simple automation tools to powerful strategic assets.
  • TPS are the foundation, capturing every routine transaction (e.g., a sale, a deposit).
  • MIS summarize TPS data into reports for managers to monitor business performance.
  • DSS provide interactive tools for senior managers to analyze data and model complex, non-routine decisions.

Thank You!

Any questions about TPS, MIS, or DSS?

Next Topic: Chapter 5 - Business Information Systems

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