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CS507 - Information Systems - Lecture Handout 08

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What are Systems?

A system is a group of elements that are integrated with the common purpose of achieving an objective.
Organization having common goal for the achievement are functionally interactive units. All systems have inputs, outputs, and feedback, and maintain a basic level of equilibrium. For example, in the human body the heart functions to support the circulatory system, which is vital to the survival of the entire body.

Purchase System

A simple example can be given of a purchase and sales system. In a typical purchase system information related to purchase of materials is kept, for instance,

  • Orders for the purchase of various materials
  • Status of deliveries received against specific orders
  • Changes in the order quantity, time, day or other information
  • Quality inspection reports and whether they need to be communicated to the supplier
  • Updated status report of stock
  • Issues made out of the stock

All and more of information is required to be linked and provided in an organized way.

Components of a system

Every system comprises of basic components which in a coordination formulate a system. These are as follows.

  • Input elements
    The information entered into a system. For instance raw data input to the computer system.
  • Process
    Any specific treatment defined in the system to be performed on the data entered into the system, for
    instance, computation, analysis, application of any model.
  • Output elements
    The results given by the system after the process has been performed on the data being input to the system.
  • Control mechanism
    Every system is expected to generate some sort of standardized output. Hence actual output needs to be compared with what it is supposed to generate. This comparison of actual with expected output is done with the help of control mechanism.
  • Feedback system
    Once the control mechanism has been devised, it needs to a reporting mechanism, which should respond with a corrective action, if required.
  • Objectives
    We just mentioned that a control mechanism should compare actual output with expected/Ideal output.
    But before this is being done, there needs to be a list of specific objectives which define expected output.

Types of Systems

  • Open System
  • Closed System
  • Open loop System
  • Closed loop system


Every system that is constructed is expected to generate some sort of output based upon the information fed into it. The output is expected to be used to evaluate system performance – whether the output complies with stated objectives of the system and generate instruction to change input to improve/change output. In this manner the system helps in establishing/re-defining:

  • Objectives-What needs to be achieved
  • Control Mechanism – Output Vs. Expected
  • Feed back – Corrective Action

Types of System

The first issue therefore is to define the environment where the systems are required to be operated and the second issue is to describe the system itself. Let us look at some examples.

  • Book Store
    Open system – any and everyone is allowed to view and purchase the books available.
  • School Library
    Closed system – entry to the library is restricted to the students only.

Thus in an open system we refer to the connection it has to its environment by means of inflows and outflows of resources between the environment and organization. When we refer to a closed system we talk of a system that is dependant on internal resources and data for decision making rather than external environment.


THE BOOK STORE may have:

  • An Open loop – if customer feedback is not taken for the purchase of books for the store OR
  • A Closed loop – if Customer feedback/interest is taken into account when selecting the books to be purchased and displayed in the store.

The SCHOOL LIBRARY may have:

  • An Open loop – if students’ feedback is not taken for the kind of books to be stocked in the library.
  • A Closed loop – if students’ interest is the determinant criteria for the kind of books that are to be carried out in the library.

For many years the computer profession and business have formed a partnership which operated under what can be termed as open-loop architecture. Advances in data warehouse technology and the Internet have enabled what can be termed as closed-loop architecture for the comprehensive usage in business of computers.

Open Loop System

In open-loop architecture, business decisions made by management have an impact in the marketplace, and the impact of that decision is measured only indirectly by the company's computer systems. For example, if a bank decides to raise interest rates, the results of the decision impact the lenders, the present and future borrowers. The results are measured indirectly as loan applications increase or decrease. Another example can be given of an insurance company which decides to offer a new kind of insurance. The market expresses its approval or disapproval by buying or not buying the new insurance offering.

By measuring the response within the open-loop architecture, the marketplace response is quantified. In every case of an open-loop business / computer architecture, the impact of the corporate decision is felt indirectly through the reactions of the marketplace and is measured indirectly by the computer systems that are used by the company. Such interactions between the decision process and the measurement of the effectiveness of the decisions made can be called an open-loop decision environment. In an openloop decision environment, there is no direct relationship between a corporate decision and a consequence, although there certainly is an indirect relationship. A big challenge in an open-loop business/computer architecture is that of measuring the consequences of the decisions made by the
company. This is due to the fact is that there is a time lag between the time the corporate decision has been made and the time when the marketplace gives its verdict on the decision.

Another difficulty is that in an open-loop environment, there may be factors other than the decision made by corporate management affecting the results achieved in the marketplace. Trying to measure precisely the effect of management's decisions is an imprecise science at best. Trying to quantify the impact of management's decisions in an open-loop environment is difficult in every case. For Example take the case of a soft-drinks company. It has no idea of the identity of its ultimate consumer. They deal through distributors who for them is the final customer and not the man on the street who actually buys the soft drink from the retailer. The feedback on the product, pricing or any other matter related to the product would be provided by the distributor and not the final consumer. Open-loop decision making is for mass marketing companies. Companies that really don't know who their customers are employ open-loop decision making.

Closed Loop System

Feedback is an integral part of the closed loop system. The corrective action as a response to the output requires two other components

  • Control Mechanism – Variance Analysis
  • Objectives – Predefined expected output from the system

Closed loop system is a system where part of the output is fed back to the system to initiate control to change either the activities of the system or input of the system. In a closed-loop decision environment, the impact of decisions can be measured very precisely. In a closed-loop decision environment, management makes a decision, the computer system singles out exactly to whom the decision applies and a direct action is taken as a result of the decision. The response to the action can then be measured on a case-by-case basis. The results of the management decision can be measured quickly and directly.

As an example of a closed- loop decision environment, suppose a department store can use its data warehouse to determine who has made purchases of more than Rs. 15000 in the past year. Once that information is collected, those customers can be offered a personalized credit card. In such a manner, management can measure the effect of the decision quickly and very accurately.

Another example can be given where management selects all customers who have shown an interest in James Bond movies. The data about such an interest, is stored in a database. If those customers are offered a new James Bond t-shirt at a discount price, the results of the promotion can be accurately and quickly calculated.

With a closed-loop decision environment, there is the possibility of having very quick and very accurate feedback on the decision process. The ability to make this assessment is very valuable. Let us illustrate the usage of the systems through an every day example. Take any international sports event: Olympics, soccer, cricket, tennis, every event is commercialised. To catch the interest of every individual, highly integrated information systems are used. For instance

  • To sell tickets
  • To advertise
  • Sports accessories
  • To set up a system for commentators to extract information for instant analysis for viewers
  • Comparative Scores
  • Projected Scores
  • Team Performances
  • Match Performances

All of the above requirements are not possible without the availability of an information system which serves the information requirements of all the interested in a timely fashion. The system has to be intelligent system capable of performing necessary tasks and providing the requisite output.

Attributes of an IS/CBIS

The attributes an Information System should have, to be worthy of being used by an organization for meeting its information requirements. Although information requirements may vary from organization to organization, however common premise is quite the same for many.

  • Efficient Processing, including query time
  • Large Storage Capacity
  • Reduced information Load
  • Cross-functional boundaries
  • Competitive Tool
  • Electronic Document Management/Paper Free environment

Let’s consider each of these one by one.

Efficient Processing

Every transaction affects our records in a number of ways. CBIS helps in updating every change being triggered in less time and with less effort.

Large Storage Capacity & Instant Access

Efficient and effective decision making requires two aspects

  • Availability of processed corporate data – occurrence of every event relating to a company affects policy making and implementation, thus recording and processing of every data results in huge amount of information
  • Instant access to right chunk of information presented in comprehensible format – both the above requirements are easy to handle when a well structured information system is in place.

Reduced Information Load

With such huge amounts of information available, managers can feel overloaded, hence taking more time in decision making. CBIS/IS help to tailor loads of information w.r.t. every manager’s requirements. The way information is presented can also save time for decision making. Hence, report formats can be tailored in accordance with the nature of problem being faced.

Cross-Functional Coordination

There are various functions in an organization that need to be managed.

  • Manufacturing
  • Purchasing
  • Warehousing
  • Marketing
  • Accounts
  • Finance
  • Human Resource

In every transaction, every department has its own share of responsibility. Thus uncoordinated effort by every department won’t help in achieving the successful completion of transaction and meeting commitments. CBIS help in keeping an updated record for easy access by every department in an organization.


A customer order is received by Sales/Marketing department. Record for customer profitability and recovery pattern are also kept by sales dept.

  • Manufacturing requires
    • Customer order in quantitative terms
    • Raw material availability for production
    • Time available for delivery
    • Procurement schedule
  • Accounts require an intimation the delivery is made along with the sales invoice
  • Customer wants the status of its/his/her order

Competitive Tool

Businesses invest to earn profits or for other non-profit based objectives. There seems no point in pouring in Co.’s hard earned money on IS if they don’t add to the quality and value of information. Hence CBIS/IS can and should work to enhance the competitive advantage for the organization.

Paper Free Environment

  • Information overload enhances paper work.
  • Maintenance of records in hard form has always proven to be a cumbersome task.
  • IS/CBIS should be efficient enough to properly manage of documents electronically.
    • Customer orders met through Virtual Private Networks and intranets (to be discussed later).
    • Payments made through Electronic payment system.
    • Report generation and record analysis gets convenient and easy.


Hence an Information System / Computer Based information system should help an organization in achieving the above mentioned goals. If put differently, an organization should not proceed with the implementation of an IS unless it helps in achieving the above goals.