Information Systems Types

  • Sustaining vs. Strategic

    There are many types of information systems based on the many areas of business. This section will introduce you to the various types. At a high level, information systems could be classified into two main types: Sustaining and Strategic.

    Sustaining information systems are the core business systems that help run day to day processes. These are the systems that must be in place to do business.

    Strategic Information Systems provide a strategic advantage to the organization. They provide a strategic advantage by summarizing/aggregating, analyzing, and interpreting transactional information. Let’s start by looking at the figure below and recognizing who is using each type of system.

    Types of Information Systems

    Sustaining

    Transaction processing systems (TPS) are the most widely used type of information system. They capture the detailed data involved in routine transactions created by business processes of every type. TPS include accounting systems, purchasing systems, and more. Workers using a TPS are primarily dealing with data in its un-analyzed, un-summarized form. TPS must be very easy to use, easy to learn, and always reliable and functioning. If a TPSs fails, then business stops. A TPS should have adequate logic to prevent the entering of erroneous data. These rules are in place to ensure the quality of data used to create information in Strategic Information Systems.

    Strategic

    Management information systems (MIS) , decision support systems (DSS) , and executive information systems (EIS) (sometimes called executive support systems [ESS]) are all strategic information systems used by higher levels of management who need to view summarized forms of the data generated in the TPS. As systems become more sophisticated (MIS -> DSS -> EIS), they not only include higher level data summaries, but also more tools to analyze the data. As business problems become less routine and more unique, managers need a greater quantity and quality of objective information to help them create solutions.

  • Functional Areas

    Okay, next let’s split this triangle a bit differently. Each functional area of the organization (e.g. sales, marketing, manufacturing, accounting, human resources, etc.) has its type of systems at each level (TPS, MIS, DSS, EIS). The image below visualizes the types of systems you might find in each functional area.

    Functional Areas

    Notice that the types of analyses that take place at each level within each area. Sales and marketing use a TPS for order processing. The products purchased, their quantities, the customer, and a timestamp are all recorded in the order processing TPS. Marketing managers need to know if their new products are selling well, where they are selling, which marketing schemes are working, etc. So their MIS and DSS will summarize sales data by all of these factors and show them trends over time. Upper management needs to decide if they should even be in certain markets, so they will look at even more data over time and come up with long-term plans and forecasts. Notice that each other functional area follows a similar pattern of systems.

  • Enterprise Resource Planning Systems (ERP)

    Let’s say you are the newly appointed CIO and you want to overhaul your IT infrastructure and buy all new systems. Where do you begin? There are usually three options you have for acquiring your IS.

    1) Build Yourself

    you should build these systems yourself if you belong to a large organization with many programmers and IT project managers who can handle the burden of supporting it. This will be a customized system.

    2) Hire Someone Else

    you shouldn't build these systems yourself if you are not a large organization with many programmers and IT project managers. This will be a customized system.

    3) Buy Off-the-Shelf

    The most popular, but you can never get exactly what you want. If it doesn't cover all of your needs, you’ll run into trouble when it comes to sharing data with any additional systems that do cover the rest of your needs.

    An ERP system is a set of integrated programs that manage a company’s vital business operations for an entire organization across each functional area—even for a complex, multisite, global organization. This is the system that fills in all of the spaces in the triangle figures above. When you hear ERP, think, the “system that does everything.”

    Advantages

    1. Improved access to quality data for operational decision making
    2. Elimination of costly, inflexible legacy systems (typically homegrown systems that have been around forever and nobody can modify them, yet they are essential to doing business)
    3. Improvement to work processes because there are fewer limitations in the IT infrastructure

    Disadvantages

    1. ERP is a beast to implement. There are many documented cases of ERP implementations that took many years and eventually failed because they were so costly and so far over schedule that they were no longer relevant.
    2. once all systems are interconnected, they are that much more vulnerable to security leaks and attacks.
  • Sub-Systems of an ERP

    These are all components of an ERP, or can also be sold as stand-alone (yet integrable) systems in the IS marketplace.

    Manufacturing and Production

    Supply chain management (SCM) systems are those which support the planning, executing, and controlling of all activities involved in raw material sourcing and procurement, converting raw materials to finished products, and warehousing and delivering finished products to customers. Another way to think of SCM is that it is the management of materials, information, and finances in the supply chain process from supplier -> manufacturer -> wholesaler -> retailer -> consumer.

    The Supply Chain

    As such, SCM systems are often interlinked (in a limited capacity) to the SCM systems of the other organizations within the supply chain. This interlinking allows critical customer demand information to be shared with partners that helps the entire supply chain to avoid the massive overproduction based on a falsely inflated sense of customer demand known as the bull-whip effect.

    The SCM process starts with sales forecasting to develop an estimate of future consumer demand. There are many SCM standalone system vendors (i.e. not part of an ERP system) like: Fishbowl Inventory, Snapfulfil, U Route, Ramp Enterprise WMS and Interchange EDI, eBid eXchange, 3PL Warehouse Manager, JDA Software, SCExpert, FlexRFP, ViewPoint Logistics, and more.

    Finance and Accounting

    Financial and managerial accounting systems track the accounting records of a business divided into assets, liabilities, revenue, expenses, and equity. These categories are subdivided in turn into details such as cash, accounts payable, accounts receivable, and so on. More often than not, financial and managerial accounting systems are included in the organization’s core ERP system, even if other systems are implemented separately. If so, then input into the general ledger occurs simultaneously as specific business transactions are processed in other specific modules.

    The Supply Chain

    There are several popular stand-alone accounting systems. Some of the most common systems include Multiview Enterprise, Intacct Financials and Accounting Systems, NetSuite Financials, Sage 100 Standard, Adaptive Insights, SAP Accounting, Epicor Financial Management, BOARD Management Intelligence Toolkit, Budget Maestro, and Vena 5.

    Accounting TPS : The TPS portion of accounting systems would include the individual entries into the general ledger.

    Accounting MIS/DSS/EIS : These systems would have querying tools to help managers identify mistakes, prepare financial statements, verify that rules from the Security and Exchange Commission are followed, etc.

    Human Resources

    Customer Relationship Management (CRM) systems are designed to help a company manage all aspects of the customer including customer information, customer encounters, marketing and advertising campaigns, sales, service after the sale, and customer loyalty programs. The general purpose of a CRM system is to improve customer loyalty. A CRM system is not part of the order processing system, but it must draw data heavily from that system to classify customers and generate useful information.

    The Supply Chain

    CRM TPS : The TPS portion of a CRM includes entering information about specific customers, customer encounters, service events, and other transactions. The image below shows the customer data from the “leads” category in SalesForce—one of the most popular CRM systems.

    Customer leads can be generated by the organization’s own marketing and advertising efforts or purchased from external consulting firms or external databases.

    CRM MIS/DSS/EIS : These portions of the CRM system allow managers to view the status and success of advertising campaigns, classify customers into segments, make predictions about future customer preferences, and much more. The image below visualizes another example from the SalesForce system.