Role of Information Systems in an Organization

The report on Management information systems reviews the role of information systems in an organization. It is a system through which organization takes an effective decision which help to attain the overall objectives of an organization. A management Information System is a system which consists of people, computers and procedures for collecting and organizing of information that will help mangers to take decision in an organization. It aims as to provide information to the top level managers so that they can take effective decisions in an organization.

Information system is a system which helps manager to make effective decisions for an organization. Information system can be defined as a set of interrelated components that collect, process, store and distribute information to the management of an organization for making effective decisions, to ensure coordination and control in an organization. (Laudon, 2006)

Information systems consist of information related to people, places and things in an organization or outside the organization .i.e. the environment surrounding business. (Laudon, 2006)

Functions of an Information System

Information systems consist of three important activities which provide information to an organization to make relevant decisions, to control operations of an organization, to identify problems and to create new products and services. Three important activities in an information system are input, processing and output. (Laudon, 2006)

Input collects data from within the organization or from its external business environment.
Processing converts the data to an useful and meaningful form i.e. information
Output helps to make available the processed information to the user of information. Output also provides feedback to the organization.

Management Information System

A management information system is a computerized system (Sarkissian, 2009) that is designed to provide useful information to an organization which will help them to make decision so as to attain their short term and long term goals.

MIS is a combination of people, computers and procedures for collecting and organizing information in an organization that is useful for decision making in an organization. (Sarkissian, 2009). MIS is an integrated system for gathering relevant data, convert it in to right information and supplying the relevant information to concerned executive thus it is a system to provide the right information to the right person at the right time.(management-hub.com)

The main objective of MIS is to provide necessary information to an organization so as to manage organization effectively. It is a communication tool between the top management and staffs that helps organization to attain their overall goals.( Sarkissian, 2010)

Physical Structure of Management Information Systems

A MIS is an organized system which consists of people, hardware, and communication networks and data sources that collects, transforms and distributes information in an organization. It is a tool which helps mangers in making decisions by providing regular flow of accurate information in an organization. (Sarkissian, 2009)

The physical components of an MIS include hardware, software, database, personnel and procedures.

Hardware

Hardware consists of all physical components of a computer system like central processing unit (CPU), input devices, output devices, storage and communication devices. (Sarkissian, 2009)

Software

Software is an interface between the information system and users of information system. Software can be of two types’ system software and applications. The system software includes the operating system and special purposes programs. Application is developed to achieve a specific task. Software plays an important part in MIS. (Sarkissian, 2009)

Database

A database is a centrally managed and organized collection of data. Database helps to store data in an organized manner and to make available to those who need that data. Database helps to reduce duplication of data as it is centrally managed data one data can be store at one place avoiding redundancy and duplication of data. (Sarkissian, 2009)

Procedures

Procedures are essential for effective use of information system. Procedures consist of various instructions like user instructions, instructions for input preparation and operating instructions. These instructions help in using information system effectively. (Sarkissian, 2009)

Personnel

Number of personnel is required for implementation of MIS like computer operators, programmers, systems analysts and managers. Human beings are key requirements for implementation of MIS. In MIS both technical and managerial level people are required for proper implementation of MIS. (Sarkissian, 2009)

Types of Management Information Systems

There are four types of Management Information systems (Sarkissian, 2009)

1. Transaction processing systems:

TPS is a type of MIS which records a huge volume of recurring and routine data. They were introduced in the 1960 and are used widely today. TPS record transactions relating to inventories, raw materials, customers and sales. Many organizations use these systems to record day to-day transactions like banks use these systems to record deposits and payments made into bank accounts and Manager Use TPS to record transactions related to payments made to suppliers, customer billing and so on. (sarkissian, 2010). These systems help manager to determine trends in data and help them to plan accordingly in order to achieve overall organizational objectives.

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2. Operations information systems:

These systems were introduced after TPS. They access data from TPS and organize data into a useable form. They were basically used to obtain data related to sales, inventory, and accounting and other performance related information. Operations information systems are used to plan and schedule production and assembly functions. (sarkissian, 2010). They help managers to take various curial decisions like how much raw materials to be ordered, when to schedule production and when to assemble the final products. It also help managers to take decisions about the manpower which will be require in the production and assembly processes.

3. Decision support systems:

A DSS helps managers to make important decisions. It consists of three fundamental components:

Database management system (DBMS): it stores large amount of data related to all problems the DSS has been designed to tackle.

Model-based management system (MBMS): it helps to convert data from DBMS into useful information which help managers in decision making process.

Dialog generation and management system (DGMS), it provides a user-friendly interface between the system and the managers who are not experts in computer. (sarkissian, 2010).

4. Expert systems:

These systems uses human knowledge stored in a computer to solve problems same as human beings. These systems recognize, formulate and solve a problem. They also explain their solutions and learn from their experience. (sarkissian, 2010)

Advantages of MIS

MIS helps organization in their functioning. MIS record, process and tabulate all business transaction which helps organization to refer to the relevant data and to make improvements in the business transaction where the organization feels that they are lacking behind. (Moorty, 2009)

For example the organization can compare actual and projected sales and can take necessary steps to improve their sales performance. (Moorty, 2009)

MIS helps the top management of an organization in good decision making. It also helps the top management to evaluate whether the allocated resources have been properly utilized and whether the targets are been met by each department.

It helps to facilitate a two way communication process in an organization. (Moorty, 2009). The top management communicates to employees what is expected from them and employees discuss their problems to their top management. Therefore MIS ensure an effective communication in an organization.

Facilitates planning and controlling

MIS provides relevant information from the top management to people working as staffs in an organization. It helps the top management to facilitate proper planning of organizational activities by providing relevant data of past and present. MIS integrates all information and ensures that each department is aware of the problems and requirements of another department and thus leads to co-ordination in an organization. (management-hub.com)

Relevant Information

MIS only provides relevant data by compressing the huge amount of data which helps management in quick decision making.

Fast reaction to market changes

MIS provides facts, data and trends which help organization to react immediately accordingly to the changes happening in the market. (Pirraglia, 2010)

Competitive advantages

Today Competition is very strong in any industries. It is important for an organization to identify their competitive advantage in order to differentiate them in the market. MIS provides huge amount of data to management which help them to identify their competitive advantage and to make strategies to enhance their competitive advantages through their decisions. (Pirraglia, 2010)

Disadvantages of MIS

MIS is a useful tool for management for making effective decisions for an organization. But there are many limitations of MIS which are as follows.

MIS cannot be used independently

MIS cannot be use independently in an organization. MIS provides only information which is useful for an organization but the interpretation and analyzes of the information requires human being and therefore MIS cannot use interpedently in an organization. (Moorty, 2009)

MIS Expense

MIS helps in effective decision making process but the implementation of MIS in an organization can be very expensive as all the divisions and processes of an organization should be reviewed. Training of new employees for the MIS can also add up to implementation charges. Besides this the installation charges are also huge. (Vitez, n.d)

Employee Training

MIS helps in effective decision making through review of all the processes and operations of an organization and proper trained employees are important for MIS implementation. Employees are involved in all the operations and processes of an organization and providing proper training to the employees will help the organization to achieve their overall objectives. (Vitez, n.d)

MIS Flexibility

MIS once installed in an organization may prove to be inflexible. And Changes in MIS program may require huge cost

Information Flaws

MIS helps management in effective decision making by providing information to the management. The main disadvantage of MIS could be that MIS sometimes gives improper or inadequate information to the management which makes it difficult for management in making decisions. (Vitez, n.d)

Analysis and Discussion

Example: Lakshmi Vilas Bank

Lakshmi Vilas Bank is a fast growing private sector bank in India. The bank provides its banking services to several customers through a network of 271 branches and 168 ATMs spread over 14 states and one union territory. (lvbank, 2010)

The products of Lakshmi Vilas bank consists of business credit, home loans, rental loans, car loans, education loans, SME credit facilities, NRI Services and online banking. It also provides mutual funds products and life insurance products of Aviva Life Insurance Co. Ltd. and general insurance products of Bajaj Allianz General Insurance Co. Ltd. (lvbank, 2010)

The LVB has been offering various technology products through innovative delivery channels like NEFT, RTGS, SMS Alerts, SMS Pull Services, Net Banking, ATMs Mobile Payments and E-commerce. (cxotoday)

Online services provided by Lakshmi Vilas bank

National Electronic Fund Transfer (NEFT)

NEFT is an efficient, secure and reliable system of funds transfer between accounts of customers of different banks. (lvbank, 2010)

REAL TIME GROSS SETTLEMENT SYSTEM (RTGS)

RTGS enables an efficient, secure and reliable transfer of funds between accounts of customers of different banks. (lvbank, 2010)

INTERNET BANKING

Internet banking allows customers to do their financial transaction from secure website of bank. Lakshmi Vilas Bank started internet banking on August 9, 2008. This facility is available to all their customers, who wish to do online banking. (lvbank, 2010)

SMS BANKING

Lakshmin Vilas bank also provides SMS banking to their customers. Using the mobile customers can enquire about their account balance and the status of their cheque book (lvbank, 2010)

Electronic Clearing Service (ECS)

Lakshmi Vilas Bank provides ECS facility to their customers. It allows fund transfer electronically and it is generally used for bulk credit and debit transactions like distribution of dividends, interest, salary pension, payment of bills. (lvbank, 2010)

Problems Faced By Lakshmi Vilas Bank

The Bank’s systems were unable to provide collective information to the manager which resulted into delay in decision making process even during emergency. (Microsoft, 2009)

The accounts and planning team spend a huge amount of time in collating financial data from 250 branches which was submitted in various format. Analyzing all these data and preparing statutory reports took valuable time and resources of the bank. (Microsoft, 2009)

The efficiency of the bank was affected due to lack of up to date information (Microsoft, 2009)

Customers wanted fast information and more reliable information.

Employees Productivity was affected

Management was facing problem in their decision making process due to unavailable of proper information.

Use of Information systems in Lakshmi Vilas Bank

Lakshmi Vilas Bank International Visa Debit Card’.

The Visa debit cared introduced by Lakshmi Vilas Bank has help the bank to provide its new as well as existing customers with the facilities to shop, pay their bills, book their movie or airline and rail tickets online. (lvbank, 2010)

MPLS architecture

It is the first bank in Tamil Nadu to achieve 100% Multiprotocol Label Switching (MPLS) Architecture. The implementation of MPLS architecture helped LVB to reduce network operating cost as well as to provide higher availability of network for the branches. It helped bank to better performance of the application at branches through lesser congestion o the network.

MPLS architecture will help bank to reduce maintenance and operational cost of 21 hubs of their bank. (cxotoday)

Enterprise storage solution

LVB has acquired enterprise storage solution which is a centralized system and will help bank to consolidate all its business database into one single system to effectively manage their customers. This solution has helped the bank to improve their overall efficiencies. (Information week, 2010)

Datacraft IT security infrastructure and datacenter upgrading

Datacraft is a provider of IT solutions and services. It had given IT security infrastructure and datacenter upgrading to LVB which will help the bank to avail the benefit of security for all their branches. (ciol, 2010)

D2K technologies

The bank chose MIS solution offered by D2K technologies while helped bank for consolidating real and accurate information for internal and compliance related reports.(Microsoft, 2009)

Microsoft SQL Server 2008

Microsoft SQL Server 2008 provides security and reliability to banks business applications. As Mentioned by chief technology officer of Lakshmi Vilas Bank which says that the speed with which they were able to provide information to internal stakeholders, customers and government departments has improved significantly. (Microsoft, 2009)

Advantage of information Technology and MIS in the Lakshmi Vilas Bank

MIS in LVB helps the bank in their accurate reporting and functions of the bank. It helps them to plan their business activities, performance their business review and to exchange information in accurate time. (expressindia, 2001)

Savings and Earning Potential Up

MIS has help bank to savings in many forms. The branch is not busy preparing statement and the account department does not spend much of their time collating reports of 251 branches. On an average each person saves almost 3 hours a day leading to huge savings in people cost. The systems has also helped bank to available all the data centrally and that is why the branches doesn’t have to submit their report to central office. (Microsoft, 2009)

Improves Financial Management & Compliance

The time spends on consolidation of statements from 251 branches by the account department and planning department has been reduced by 30%. As stated by assistant manager of Lakshmi Vilas Bank, Compliance and reporting to the RBI and other government agencies have become fast and accurate as per compliance requirements. (Microsoft, 2009)

Dashboards Enable Management with Decision Making

The decision support system type of MIS enables management in fast decision making process by providing tabular and graphically representation of information. This system provides banks management by setting new goals by evaluating past trends. Each employee of the bank can access relevant and more secure information from central location. Customers and all stake holders of the bank can access relevant information from the bank. (Microsoft, 2009)

Conclusion and Recommendations

Information system is a system which helps management to take effective decisions for an organization. It is a tool which collect, process, store and distribute information to the management. Information systems are useful for providing information rather than raw data to the management. Data only shows number whereas information provides logical understanding of a figure.

Information systems basically consist of data related to people, process and procedures inside the organization as well as it provides information of external business environment affecting the business.

Information system performs the functions of processing of input into output .i.e. collecting of data and processing of the data into information and thereby helping managers in their decision making process.

Management information system is a computerized system of providing information to the manager so that they can take long term and short term decisions in an organization.

MIS is organized system which consists of people, hardware, and communication networks that collect data and transform that data into information.

There are various types of Information systems based on different levels of organization i.e. strategic level dealing with the top most management for their long term decisions. Management level which deals with various managers with their plans and operational level that deals with the day to day activities of business.

There are different types of Management information systems like Transaction processing systems that records huge volume of recurring and routine data like raw materials, inventories, customers and sales. Operations information systems track data from TPS and whose aim objective is to plan and schedule production and assembly functions. Decision support systems deal with making important decisions. Experts systems is a system which helps organization in solving their problems like human beings through their past experience.

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MIS helps organization by providing various benefits like MIS compares the performance of an organization which helps managers to identify whether the organization is performing good or not. It helps management in their decision making process by providing useful information to them. It is a tool of communication between top level management and employees. It provides only relevant data to management by compressing huge amount of data. It helps to ensure better co-ordination in an organization. It helps company to identify their competitive advantage and help them to enhance the value of their products.

Besides various benefits there are some limitations of MIS like MIS cannot be independently used in an organization. The expense of installing MIS is very huge. MIS is a technical product which requires organization to provide training to huge number of their employees. Once a MIS is installed it is very costly to change that MIS system. Sometimes it may happen that MIS provides inadequate data which may not prove helpful for an organization.

We have also taken example of Lakshmi Vilas bank in order to understand the impact of information systems on the working of the bank. It helped this bank to increase the speed and accuracy of information flow in the organization as well as outside the organization

Today MIS is a useful tool of making effective decisions in an organization so it is very important that it should have no limitations. The cost of implementing MIS in an organization is very huge and is not flexible enough so it is important to make available MIS which doesn’t cost much for an organization and which can accept changes.

As stated earlier in our example of Lakshmi Vilas bank, the bank is using Information systems effectively and earning profits from it but there are many things bank should focus on

With the increase in technology Bank should update their IS so that they can provide their customer with better services and increase its productivity.

The IS used in a bank should be more secure.

Thus Management Information system helps management in their effective decision making process and help them to run their organization profitably.

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