Information systems consist of an organized network of people and infrastructure that aid in decision making. The infrastructure includes both hardware and software. Scholars have classified information systems into five major categories. These categories may sometimes overlap in some businesses. They are office automation, transaction processing systems, knowledge management systems, decision support systems, management information systems and executive support systems. None of these systems works in isolation. Their integrated output aids in decision making.
A local Saudi Arabian company (Cube Technologies) has been chosen for this case study. Cube Technologies was incorporated in the year 2006. It specializes in the provision of IT solutions to manufacturing companies. Their products range from human-machine interfaces to custom-made Management Information Systems. This company imports the majority of its products from Siemens. This paper will examine the information systems in operation at Cube Technologies (Rainer & Turban, 2008).
Types of Information Systems and Their Purpose
Office Automation Software is the basic level of Information System in operation at Cube Technologies. This system aids in the organization of worker’s documents in computers. It also eases functions like word processing and creation of spreadsheets. The infrastructure includes both computer hardware and software. This software includes word processors and computer Operating Systems. The software is usually integrated e.g. one can export data from Microsoft Excel to Microsoft Access.
Transaction Processing Systems are concerned with the day to day operations of Cube Technologies. They record routine transactions such as sales, orders and raw materials issues from the store. The transaction processing systems in operation at Cube Technologies are a stock system and a customer billing service which sends invoices directly to customers. This level of information system supports the operations level of the company.
Decision Support Systems aid Cube Technologies management in making crucial decisions. They can take input from Transaction Processing Systems and model a variety of hypothetical scenarios. They are also capable of analysis and usually aid decision making in times of uncertainty. Semi –structured and unstructured decisions are made using simulations created by the decision support systems. Cube Technologies has several of these in operation to aid in decisions concerning change in technology which can render their products obsolete (Pearlson & Saunders, 2009).
Management Information Systems are used by middle level management in the efficient allocation of resources. Unlike Transaction Processing Systems, their output is more summarized to enable the manager consider the operations of his whole department. The information processed is sourced from the Transaction Processing System. In Cube Technologies, Management Information Systems produce monthly reports for finance and human resource managers.
Executive information Systems aid decision making at the strategic level. The information produced is both inward and outward looking. Reports produced are much summarised and aid in an overview of the whole organization. The CEO and other directors make use of this type of system. The format of information is easy to understand and interactive. It gets information from both internal and external sources. Cube Technologies uses this system to make decisions about the strategic direction of the firm.
Users of Company Information and their Needs
Company information is used by both internal and external users. Internal users include management, employees and the executive board of directors. Management uses information concerned with operations to aid in decisions about the efficient allocation of resources and for performance management. Without this information, they would not be in control over the running of the organization. Employees seek information about their performance, and the company’s performance. Information about their performance helps them to know how much performance related pay to expect. This is a source of motivation. The performance of the company is of interest to them because it is a pointer towards their job security. A company which has liquidity issues or is making constant losses has a higher chance of lying off workers to cut costs than a stable company. Directors require both internal information about the company’s performance and external information about its competitors and the state of the industry. They need to be able to know the strategic position of Cube Technologies in relation to their competitors. This is in terms of their internal strengths and weaknesses with regard to the threats and opportunities in the industry (Magal & Word, 2009).
External information users include suppliers, shareholders and customers. Suppliers require financial information regarding the credit worthiness of the Cube Technologies. They need to be assured that if they advance credit to Cube Technologies, they will be paid. This is made available to them through the liquidity and leverage ratios in the financial statements. Shareholders are concerned with the return on their investment. They would like to know that managers are running the entity in such a manner as to increase their wealth. The financial statements are usually addressed to shareholders in an effort to reduce information asymmetry. Various ratios can be computed from the financial statements which help shareholders in making investment decisions. Customers would like to know that they will continue enjoying quality products from the company. They therefore need to be assured of the entity’s going concern and the quality of the products. This information can be made available via disclosures in the financial statements.
The Transaction Processing system at Cube Technologies is very essential to its operations. The sales invoicing system collects data about the purchases made by each customer. Then it totals up the sum and creates an invoice. It is also linked with the purchases ledger and the receivables ledger, such that when a customer is invoiced, the relevant double entry is automatically done. The information produced by this system aids the marketing department to know who their major customers are, so they are able to concentrate on retaining them.
Purchase of stock is also managed by a transaction processing system. This particular system checks inventory out of the store and automatically reduces the available stock. Data for this system is collected via electronic swiping devices that detect special barcodes on each item. When the item quantity reaches re-order level, the system automatically places an order with pre-determined suppliers. This means that Cube Technologies never runs out of inventory. They can meet uncertain demand if it arises (Haag & Cummings, 2008).
The information produced from these two systems is useful to managers because it is relevant to operations. It can also be compared to previous periods to check whether there has been an improvement or a decline. The purchases transaction processing system is however lacking because information regarding obsolete products does not feed into it in a timely manner. This is quite dangerous as Cube Technologies is operating in the technology industry which changes overnight.
The company is pursuing a niche marketing strategy. It seeks to dominate competitors in the provision of IT solutions to manufacturing companies. Accounting Information Systems enable this by the provision of information for decision making. Decision support systems create simulations that help management answer ‘what if’ questions. Executive information systems enable directors to make well informed strategic decisions during planning. Management information systems ensure that managers are informed about the running of the organization. Office automation makes all work done on documents, databases and spreadsheets easier and less time consuming. Therefore, Accounting Information Systems are now one of the core competencies at Cube Technologies.
Haag, S. & Cummings, M. (2008). Information Systems Essentials. London: Mc Graw-Hill.
Magal, S. R. & Word, J. (2009). Essentials of Business Processes and Information Systems. Toronto: Wiley.
Pearlson, K. E. & Saunders, C. S. (2009). Managing and Using Information Systems: A Strategic Approach. London: Wiley.
Rainer, K. R., & Turban, E. (2008). Introduction to Information Systems: Supporting and Transforming Business. Chicago: Wiley.