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Information Systems

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An information system collects, stores, and processes data to provide useful, accurate, and timely information, typically within the context of an organization. Although an information system does not necessarily have to be computerized, today most information systems rely on computers and communications networks to store, process, and transmit information with far more efficientcy than would be possible with a manual system. In this unit, the term “information system” refers to a system that uses computers and usually includes communications networks.

An information system is used by the people in an organization and its customers. You've undoubtedly used many information systems – for example, when registering for classes, getting cash from an ATM, and purchasing merchandise on the Web. You might even work for a business or nonprofit organization where you have access to an information system. Not everyone in an organization uses an information system in the same way. An information system must support the needs of people who engage in many different organizational activities.

An information system can help the people in an organization perform their jobs more quickly and effectively by automating routine tasks, such as reordering inventory, taking customer orders, or sending out renewal notices. Information systems can also help people solve problems. One of the major functions of an information system is to help people make decisions in response to problems.

Because organizations have different missions and face different problems, they require different kinds of information systems. An information system might have one or more of the following components: a transaction processing system, a management information system, a decision support system, or an expert system. Let’s take a closer look at a transaction processing system.

In an information system context, a transaction is an exchange between two parties that is recorded and stored in a computer system. When you order a product at a Web site, buy merchandise in a store, or withdraw cash from an ATM, you are involved in a transaction.

Many organizational activities involve transactions. A transaction processing system (TPS) provides a way to collect, process, store, display, modify, or cancel transactions. Most transaction processing systems allow many transactions to be entered simultaneously. The data collected by a TPS is typically stored in databases, and can be used to produce a regularly scheduled set of reports, such as monthly bills, weekly paychecks, annual inventory summaries, daily manufacturing schedules, or periodic check registers.

Early transaction processing systems, such as bankingand payroll applications of the 1970s, used batch processing to collect and hold a group of transactions for processing until the end of a day period. An entire batch was then processed without human intervention, until all transactions were completed or until an error occurred.

In contrast to batch processing, most modern transaction processing systems use online processing—a real-time method in which each transaction is processed as it is entered. Such a system is often referred to as an OLTP system(online transaction processing system). OLTP uses a “commit or rollback” strategy to ensure that each transaction is processed correctly. This strategy is crucial because most transactions require a sequence of steps, and every step must succeed for the transaction to be completed.

If you withdraw cash from an ATM the bank’s computer must make sure your account contains sufficient funds before it deducts the withdrawal from your account and allows the ATM to deliver cash. If the ATM is out of cash, however, the transaction fails, and the withdrawal should not be deducted from your account. A TPS can committoa transaction and permanently update database records only if every step of the transaction can be successfully processed. If even one step fails, the entire transaction fails anda rollbackreturns the records to their original state.

Although a TPS excels at maintaining transaction data entered by clerical personnel and online customers, its reporting capabilities are limited. A typical TPS generates detail reports, which provide a basic record of completed transactions. However, managers need more sophisticated reports to help them analyze data.


Comprehension check. Mark the following statements as True or False.

1. An information system usually helps people to find solutions to their problems.

2. You aren’t involved in a transaction when you order a product online.

3. All POS systems automatically calculate, change and identify customers who previously wrote bad checks.

4. Everyone in an organization uses an information system in the same way.

5. An information system has to be computerized.

6. A TPS is one of the components of an information system.


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