Without a larger context, big data is simply a compiled list of numbers. In the data-driven world, organizations can gather as much information as they want, but without a system in place to extract meaning from it, the data is meaningless.
Data becomes valuable information when there is an intelligible context behind it, and knowledge of that context is generated through experience, analysis, and computer science.
An information system is utilized by companies to gather and codify data that is analyzed and extracted to improve operational knowledge. Because knowledge is power, businesses can use information system-based insights to enhance decision-making and streamline business processes.
Read ahead for a comprehensive overview of information systems and how they work to optimize internal processes and streamline the supply chain-
Components of Information Systems: Information technology includes-
Computer hardware and software
Databases and data warehouses
Human resources and procedures
What Are Information Systems?
Information systems are the particular business intelligence systems utilized by various participants to achieve a company objective.
While other business terminology is concerned with consumer needs, information systems revolve around optimizing internal processes, and increasing efficiency.
Because an information system streamlines activities and improves productivity internally, there is also an external increase in customer satisfaction and brand loyalty.
An information system is represented by a combination of three factors, or a data management system triangle. All three of these components must interact with one another for a business goal to be realized-
The people involved in an information system typically include a combination of employees, management, and involved stakeholders. These individuals might collaborate to finish a task, or they may be part of a network that indirectly contributes to completing a business process.
The majority of people involved interact in one way or another with the information technology system that is used to increase operational efficiency.
2. Business Processes
Business processes include a series of steps performed by a group of stakeholders to complete a task. Different business units are required to meet a set of objectives and complete projects that contribute to the greater good of the organization.
For example, Human Resources is in charge of hiring qualified individuals that match specific roles in the organization. These hired employees utilize their talent to enhance the company and help it meet its objectives.
3. Information Technology
Information technology involves all of the business intelligence systems, hardware, or other analytics software employed to assist in completing a business process.
The purpose of utilizing information technology is to maximize efficiency and improve the quality of products and/or services. To illustrate, many HR clerks use accounting software and/or time clocks to accurately track employee hours and complete payroll.
The History of Information Systems
At the beginning of the 19th century in Paris, inventor Joseph Marie Charles Jacquard showcased the first punch card to the world.
Jacquard's invention contained rows of holes that a worker could string together and insert into a loom so he no longer had to remember a pattern. If the order of punch cards was adjusted, the pattern would also be adjusted. For the first time in history, information was automated and organized to dictate how workers could operate a loom.
By 1911, punch cards were developed enough to be used by different industries to track and store data, such as weight recording. When computers emerged in the mid-20th century, punch cards were eventually replaced by tapes or disks, which increased the speed and quality of tracking and storing information.
These MIS systems were utilized for accounting, particularly during the last half of the 20th century when computer systems became smaller and less expensive.
Eventually, computer systems became upgraded enough so different business units in a company could communicate with one another.
At the end of the 20th century, both small and large businesses could afford information technology and connect networks by utilizing the internet. Protection mechanisms put in place to enhance information security also became more intricate during this time.
To understand this complex evolution of the information system in the latter half of the 20th century, it's simpler to break it down into 5 separate eras, which include-
First Era (mid-1960's- mid-1970's)
In the early 1960s, information systems were only employed by management or accounting departments.
Third-generation computers such as the IBM 360 were the primary technology systems employed by these business units.
Ethernet networks, or technology used for connecting devices in a wired local area/wide area network, were also developed in this era.
Most organizations used committees or other initiatives to determine who would use information systems and when.
Personal computers (PCs) and mid-range computers were the primary technology systems used during this time.
Third Era (mid-1980's to late 1990s)
During this period, information systems started to become less centralized, allowing multiple departments to have their technology systems.
Chief Information Officer positions were created with the specific purpose of managing different information systems. The internet came to be during this time, along with internetworking.
Fourth Era (late 1990's to 2020)
Though information systems are still correlated to management, systems are more widely used by different employees and involved stakeholders.
Workers can access data across various platforms and systems are integrated with other systems.
Technology systems include business intelligence platforms, tablets, phones, or social media platforms.
Fifth Era (2020-the Future)
Because of cloud computing, most workers have tools across different platforms to make better decisions. Since information systems are much more accessible and open, it's become difficult to know who creates and who consumes information.
The speed and accuracy of information systems will continue to develop and improve as time moves on, further blurring the line between consumer and creator.
The Importance of Information Systems
Because information systems have developed over time, both small and large businesses are utilizing them to complete manual processes.
For example, employees can now access a dashboard to see their progress towards completing business goals. Management can use the dashboard to track worker efficiency and ensure tasks are completed on time.
As a result of using information systems in the workplace, efficiency and productivity have improved, along with the quality of deliverables. Information systems are also important because they-
1. Optimize Communication
Information systems can optimize and improve the efficiency of collecting and dispensing data. This allows both managers and workers to communicate quickly to complete company tasks.
For example, management can give workers access to documents stored in the Cloud or another database. Employees can communicate by inputting new information that the system automatically tracks and updates.
Because information systems provide the most updated and accurate data, owners and managers can improve operational decision-making.
Enterprise leaders can use an IS to improve customer service, streamline internal processes, and offer a competitive edge in the form of a price advantage.
Sales and marketing data give insight into customer purchasing patterns and market trends, which provides the information needed to make a customized marketing campaign or enhance sales strategies.
3. Enhance Record-Keeping
An information system stores all of the required company data to comply with tax and labor laws, such as financial, sales, and payroll records.
Successful companies exploit their information system's recording capabilities by properly organizing and presenting historical data so it is available when needed.
Information systems also generate audit trails, which allow management to quickly access an old customer transaction or employee input.
The Benefits of Using Information Systems
Because information systems streamline business activities and increase access to information, organizations can optimize decision-making and improve operational management. As a consequence, businesses can increase their competitive advantage and target new customers to generate more profit.
Other top benefits of using information systems include-
1. Tailored Information
Each business intelligence system delivers the data a specific user needs to take a particular action. For example, a dashboard tells the sales manager how each team member is performing while also using the same data set to tell each team member how many leads he/she needs to contact to meet a KPI.
2. Customized Formats
Modern information systems customize formats for each user, making it easier for everyone to access and understand data. For example, dashboards use a bar chart to display sales data to managers so they can know each week's productivity.
Based on the same set of data, a sales team member can view a pie graph to see his individual contribution to the total sales data. Customizing formats allows everyone to complete their jobs in a timely fashion.
3. Real-Time Data
When a user inputs a new variable, an information system automatically updates and sends notifications to any authorized individuals. Employees no longer have to send emails to other departments notifying them of a change, and management doesn't have to worry about duplicated data or outdated inputs.
As a result of having real-time data available, decision-making across the organization improves.
Information systems are adaptable and can easily be reprogrammed to adjust to new business requirements.
Because individual portions of the technology system can usually be upgraded if there is a need, businesses don't have to buy an entirely new system every time there is a new requirement. As a result, the organization can save money, time, and resources on managing all of their data.
Types of Information Systems
Because information requirements can vary in each department, different information systems are employed for business units.
For example, mid-management requires confidential and detailed information to track every employee's actions while regular workers need systems that help them complete their objectives.
As a result, most companies have several different information systems that function simultaneously. These include-
1. Executive IS
This IS is primarily utilized by senior management executives to improve operational decision-making. Executive information systems hold inventory data, projected financial numbers acquired from new service/product expectations, economic and market information, and more.
It is used to collect, analyze, and present the most valuable internal and external data required to operate and build a competitive edge.
2. Management IS
Management information systems (MIS) handle internal operational data sources. They typically gather and summarize transaction data that can be turned into reports for management. These types of systems generate real-time descriptive data so involved stakeholders can track KPIs, take actions, and solve bottlenecks.
3. Decision Support System
This information system assists employees in making a choice when a particular situation arises. It contains methodologies and tools used to gather related data and assess the alternative choices so the user can make the best decision.
A decision support system typically uses various spreadsheets and other tools to generate models that assist employees when confronting a complex issue.
4. Knowledge Management System
A knowledge management system holds training materials, new knowledge, and related user experience accessed by employees. Its purpose is to help a company generate and increase access to data so others can collaborate on a project or share data with another worker.
An example of a knowledge management system may include new hire training videos or data on company policies and procedures.
5. Transaction Processing System
A transaction processing system is utilized to generate and complete tedious processes quickly and reliably. For example, companies tend to have billing information systems that generate invoices for customers or accounting systems that use pre-programmed calculations to perform payroll and pay taxes.
By replacing manual processes with a transaction processing system, organizations can increase efficiency and ensure accuracy.
6. Office Automation System
An office automation system is used to optimize the efficiency of workers who have to process transactions or data. For example, Microsoft Office XP is employed by many companies to help users accomplish different office tasks or computing needs.
Many of these automation systems allow remote workers to access company data from their laptops so they don't have to come into the office. This allows organizations to expand their operating capabilities so they aren't restricted to functioning from one single location.
Best Practices for Building an Information System
Though information systems help increase productivity and efficiency in the workplace by optimizing internal processes, some challenges come when implementing one. Managing multiple data sources in a company can be complicated, particularly if several systems operate independently of one another and contain duplicate information.
A lack of integration can lead to non-compliance, decreased productivity, and poor decision-making based on unreliable data. Having a comprehensive understanding of the required architecture and integration capabilities can help resolve many of these concerns. Best practices to build a functioning information system include-
1. Understand the Organization's Key Objectives
To build a properly integrated information system, the organization needs to have a clear understanding of its needs and objectives. Knowing financial targets and customer requirements can help decision-makers understand which internal and external processes help meet these goals.
2. Understand Information Needs
Once the organization knows what its plans and strategies are, it can consider which information is needed to meet those objectives.
This is accomplished by verifying and comprehending what each business unit is responsible for, along with the primary business processes needed to carry out those functions. It's also essential to identify the key stakeholders who must access this information to carry out their roles.
3. Analyze the Organization's Starting Point
Though it's important to establish future objectives, the organization should consider what systems and data are currently in place. Factors to consider are whether touchpoints between various networks and data are automated or not, what key functions exist in each system, and how information is currently utilized.
This knowledge can be used to produce a map of systems and data that shows inefficiencies, duplicated efforts, and other problems that might be resolved by implementing a new information system.
4. Review and Compile
The organization should assess the future and current systems to identify which aspects need improvement or consolidation.
Key aspects to look for include data duplication, missing data, inconsistent data, non-functional systems, repetitive manual processes, and the way data moves inside and outside the organization. This will help know which system can help fill the gaps that lead to an increase in inefficiency.
5. Identify Core Systems
Finally, the business should bring all of its findings together to identify an information system architecture that offers easy user access and high functionality.
The company should consider how the user plans to access the information in each IS, such as business interfaces, portals, or BI suites. Also, it should recognize what the end needs of the user are and which system is the best solution to meet those requirements.
What the Future Holds for Information Systems: Sometime in the future, science will begin to create unrealities that we can't even begin to imagine. As we evolve, we will be able to construct other information systems that correspond to other realities, universes based on logic completely different than ours and not based on space and time. - Robert Lanza
An information triangle includes the people, technology systems/data science, and business processes utilized to optimize and streamline business actions.
Information systems are important because they use machine learning techniques to optimize operational management, improve decision-making, enhance communication, and maintain records. They also tailor information, customize it to the user's needs, provide real-time information, and are highly adaptable.
Different IS's include executive information systems, management information systems, decision support systems, knowledge management systems, transaction processing systems, and office automation systems.
Best practices to implement an IS include understanding key objectives, recognizing information needs, analyzing the organization's starting point, reviewing and compiling information, and identifying core systems.