What is an information system?

As mentioned previously, an information system (IS) is a set of interrelated elements or components that collect (input), manipulate (process), store, and disseminate (output) data and information and provide a corrective reaction (feedback mechanism) to meet an objective (see Figure 1.3). The feedback mechanism is the component that helps organizations achieve their goals, such as increasing profits or improving customer service.

The Components of an Information System Figure 1.3

Feedback

Input Processing Output

Input, Processing, Output, Feedback

Input

In information systems, inputis the activity of gathering and capturing raw data. In producing paychecks, for example, the number of hours every employee works must be collected before paychecks can be calculated or printed. In a university grading system, instructors must submit student grades before a summary of grades for the semester or quarter can be compiled and sent to students.

Processing

In information systems, processingmeans converting or transforming data into useful outputs. Processing can involve making calculations, comparing data and taking alternative actions, and storing data for future use. Processing data into useful information is critical in business settings.

Processing can be done manually or with computer assistance. In a payroll application, the number of hours each employee worked must be converted into net, or take-home, pay. Other inputs often include employee ID number and department. The processing can first involve multiplying the number of hours worked by the employee’s hourly pay rate to get gross pay. If weekly hours worked exceed 40, overtime pay might also be included. Then deductions—for example, federal and state taxes or contributions to insurance or savings plans—are subtracted from gross pay to get net pay.

After these calculations and comparisons are performed, the results are typically stored. Storage involves keeping data and information available for future use, including output, discussed next.

Output

In information systems, outputinvolves producing useful information, usually in the form of documents and reports. Outputs can include paychecks for employees, reports for managers, and information supplied to stockholders, banks, government agencies, and other groups. In some cases, output from one system can become input for another. For example, output from a system that processes sales orders can be used as input to a customer billing system.

Feedback

Feedback is critical to the successful operation of a system. Output is used to make changes to input or processing activities. In information systems, feedbackis information from the system that is used to make changes to input or processing activities. For example, errors or problems might make it necessary to correct input data or change a process. Consider a payroll example. Perhaps the number of hours an employee worked was entered as 400 instead of 40. Fortunately, most information systems check to make sure that data falls within certain ranges. For number of hours worked, the range might be from 0 to 100 because it is unlikely that an employee would work more than 100 hours in a week. The information system would determine that 400 hours is out of range and provide feedback. The feedback is used to check and correct the input on the number of hours worked to 40. If undetected, this error would result in a very high net pay on the printed paycheck!

Feedback is also important for managers and decision makers. For example, a furniture maker could use a computerized feedback system to link its suppliers and plants. The output from an information system might indicate that inventory levels for mahogany and oak are getting low—a potential problem. A manager could use this feedback to decide to order more wood from a supplier. These new inventory orders then become input to the system. In addition to this reactive approach, a computer system can also be proactive—predicting future events to avoid problems. This concept, often called forecasting, can be used to estimate future sales and order more inventory before a shortage occurs. According to the CIO of Coty Fragrance, which produces Jennifer Lopez and Vera Wang brands, “If we can’t meet demand, it annoys the retailers, the consumers lose interest, and we lose sales.”¹¹ Forecasting is also used to predict the strength and landfall sites of hurricanes, future stock-market values, and who will win a political election. Disappointed with existing weather forecasting systems, Robert Baron developed a more sophisticated forecasting approach that used radar data along with other meteorological data to forecast storms and weather. Today, his weather forecasting software generates about $25 million in annual revenues. ¹² Forecasting systems can help meteorologists predict the strength and landfall sites of tropical storms. (Source: Courtesy of AP Photo/Bullit Marquez.)

EXERCISES TO TEXT 3.

1. Write out from the text the phrases that contain words data, system, output, input, predict.

2. Write out the words from the GLOSSARY into 3 columns: