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An information system provides procedures to record make available information, concerning part of the organization, to assist organization related activities. Information systems are more then the computers. Effective usage of information system requires a thorough understanding of the organization, its management and the information technology it implies. Information system is defined as the “combination of hardware, software, infrastructure and trained personnel organized to facilitate planning, control, coordination, and decision making.”(Web-2). Three activities; Input, Processing, and Output in the information system produce the information that are needed to make decision making, Analyzing the problems, controlling operation, and in launching new products. Input collects the raw data, which is manifested into meaning form by the Processor and Output transfers the processed data to the relevant person.
Super market check-out is one of the most common examples of uses of information system used by the retail industry. It holds loads of valued information. It keeps millions of data, such as product cost and the details, product identification number and number of product sold out. On the basis of the information collected, companies analyze the total number of the items sold out, items left in the stock, items that sell most, the stuff that need to ordered, and the most analyze its sales.
Information system is divided into operational, knowledge, management and strategic level and into five major functional areas; production and manufacturing, Finance, Accounting, sales & marketing and Human resources. (Laudon and Laudon, 2003) A strategic level system helps senior management in tackling and addressing strategic issues in order to support the long range planning. Management level systems supports in monitoring, controlling, decision making, and administrative activities for middle managers. Knowledge and data workers are supported by the knowledge level system. Its importance is felt, when new ideas (knowledge) are to be injected into the organization. And basic activities and transactions of the organization (such as cash deposit, sales, receipts, payroll etc) are done by the operational managers, which is supported by the Operational level system. It is clear from the above classifications, that the information system is vital for every level of the organization. Since, every level within the organization is interdependent. Any mistake, delays in information passage in any of the level, is enough for downfall of the organization.
Similarly, in many ways, the information system supports the main business functions. For example, sales and marketing information system helps the firm to explore markets for its products or services, develop products and services that meet customers’ need and promote and sell those products and services. The manufacturing and production information system is responsible for planning, development and production of goods and services and control the production flow. Likewise, finance and accounting information system helps to set up long-term investment goals and provide long-range forecasts of financial performance of the firm. It also helps the managers to manage and control the firm’s financial resources. Moreover, human resources information system plays a vital
role for managing the people effectively. It keeps and maintains employee records which makes easy to analyze and evaluate job performance, conduct recruitment and selection, training and development and retention as well.
Managers and the Organization cannot ignore information system due to its critical nature. The influence and the importance of information system are evident in decision making, planning, and management of its employee and in management of the products. One of the most important roles of a manager is to make effective decisions which is very challenging job of the manager. The managers often depend on information system to make decisions because it helps to communicate and distribute information. Interdependence between the business strategy and the information system is becoming more and more complicated. Any change in any of the components has overall effect on the organization.
Future prospect of any organization wholly depends on the information system it relies on. The following figure shows the relationship between organization and the Information system. When rules, procedures and strategy of the organization have to be changed, it is also important to change hardware, software, database and, telecommunication. One of the reasons behind the vast importance of the information system in any organization and its effect on so many people is because of the high power and falling cost of the computer technologies.
Organization Information System
Figure1. Relationship between organization and information system
A theory based on both economic and behavioral approaches has made us easier to know the affect of information system on organization. According to Economic Theory, Information technology helps firm contract in size, because it helps to reduce the transaction cost. According to (Williamson, 1985; Coase, 1937), using market place is expensive because of the problem of communicating with distant suppliers, buying insurance, obtaining product, and so on. According to Transaction cost theory, firms and organization try to lower the cost of transaction as much as they do on production costs. It also reduces Management costs. Similarly, according to Agency theory, firms are viewed as the nexus of contracts among self interested individuals who most be supervised and managed. (Laudon and Laudon, 2003, p80).
Information system is a multidisciplinary field having different perspectives on information systems. In order to make the information system work properly, a lot of social, organizational and intellectual investments are required. It is divided into two different approaches, i.e, technical approach and behavioral approach.
Technical approach includes computer science, management science and operations research where computer science purely deals with the computer system such as computation methods and efficient data storage and access method. The management science is responsible for developing models for decision-making and management practices. Similarly, operations research emphasizes mathematical techniques that help organization to optimize selected parameters such as transportation, cost of transaction and inventory control. So, technical approach is concerned with mathematically based models, physical technology and the capabilities of these systems.
Behavioral approach focuses on the changes including management and organizational policy, attitudes and behavior. Although it does not normally focus on technical solutions, it does not ignore technology. The models used in this approach help to explore different issues which can not be explored through technical approach. Important concepts and methods are generated from other behavioral disciplines. For example, sociologists study information system in order to get knowledge about how development of system is shaped by groups and organizations. Similarly, the psychologists study information system so that they can know how human decision makers understand and use formal information. On the other hand, the economists study information system to know what impact has been created by system on cost structure of the firm and the markets as well. The ideas from the sociological, psychological and political point of view are useful in determining the behavior of individual firms, which is stated by the behavioral approach.
It is clear now that the introduction of information system in organization is to improve its effectiveness and efficiency. Automated activities helps in the reduction of the cost incurred, brings more accuracy then the human minds, and the most is the Speed. It saves time and reduces unnecessary costs. Organizations like British gas, British Petroleum, Banks and many more calculates lots of customer bills and other activities, which is only possible through the use of information system. It can be said with guarantee that many large companies would not survive more than 24 hrs without information system. On the contrary, its dark side on the cost at initial installment, the changes that comes along with it, and reluctance of the employee to go with it, and the cost of unproductive information would cause a severe problem to the organization.
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