Introduction to Management Information Systems - Future of Business Organization and Management

The first large-scale use of computers in business in the late 1950s and 1960s focused on fundamental data processing. Companies saw computers primarily as a way to automate such functions as payroll, inventory, orders, and accounts payable, hoping to keep up with the growing volume of data in the expanding economy while saving labor costs associated with manual methods. The separate data files and programs used for basic business functions were generally not well integrated and could not be easily used to obtain crucial information about the performance of the business. By the 1970s, the growing capabilities of computers encouraged executives to look for ways that their information systems could be used to competitive advantage. Clearly, one possibility was that reporting and analysis software could be used to help them make faster and better decisions, such as about what products or markets to emphasize. To achieve this, however, the “data processing department” had to be transformed into a “management information system” (MIS) that could allow the analysis of business operations at a variety of levels.

The MIS Pyramid

If one thinks of the information infrastructure of an enterprise as being shaped like a pyramid, the bottom of the pyramid consists of the transactions themselves, where products and services are delivered, and the supporting point of sale, inventory, and distribution systems that keep track of the flow of product. The next layer up begins the process of integration and operational control. For example, previously separate sales and inventory system (perhaps updated through a daily batch process) now become part of an integrated system where a sale is immediately reflected in reduced inventory, and the inventory system is in turn interfaced with the order system so more of a product is ordered when it goes out of stock.

Source: https://www.guru99.com/images/MIS/012316_0709_WhatisMISM1.png

The next layer can be called the operational analysis layer. Here such functions as sales, inventory, and orders aren’t simply connected; they are part of the same system of databases. This means that both simple and complex queries and analysis can be run against a database containing every type of transaction that the business engages in. In addition to routine reports such as sales by region or product line, market researchers or strategic planners can receive the data they need to answer questions such as: 

• What products are staying on the shelf the longest?
•  What is the ratio between profitability and shelf space for particular items? 
•  What is the relationship between price reductions, sales, and profits for a certain category of items? 

The goal of this layer is to help managers identify the variables that affect the performance of their store or other business division and to determine how to optimize that performance.

The very top level can be called the strategic planning layer. Here top-level executives are interested in the overall direction of the business: determining which divisions of a company should receive the greatest long-term investment, and which perhaps should be phased out. For example:

•  Which kind of sales is growing the fastest: in-store, mail-order catalog, or Internet online store?
•  How is our market share trending compared to various classes of competitors?
•  How are sales trending with regard to various types of customers?

Software support

There are many considerations to choosing the appropriate software to support the users who are trying to answer questions at the various levels of management. At a minimum, to create a true management information system, the information from daily transactions must be made accessible to a variety of query or analysis programs. In the past three decades, many established businesses have had to go through a painful process of converting a variety of separate databases and “legacy software” (often written in COBOL in the 1960s or 1970s) into a modern relational database such as Oracle or Microsoft Access. Sometimes a company has decided that the cost of rewriting software and converting data is simply too high, and instead, opts for a patchwork of utility programs to convert data from one program to another. The growth of networking in the 1980s and Web-based intranets in the 1990s required that the old model of a large, centralized data repository accessed directly by only a few users be replaced by a less centralized model, sometimes going as far as using a distributed database system where data “objects” can reside throughout the network yet be accessed quickly by any user (see database management system). An alternative is the data repository that includes queries and other tools.

Future of MIS

With the prominence of the Internet and e-commerce today, MIS has had to cope with an even more complex and fastmoving world. On the one hand, widespread e-commerce enables the capturing of more detailed data about transactions and consumer behavior in general. New tools for analyzing large repositories of data (see data mining) make it possible to continually derive new insights from the recent past. It is thus clear that information is not just a tool but also a corporate asset in itself. On the other hand, fierce competition and often shrinking profit margins in e-commerce have placed increasing pressure on MIS departments to find the greatest competitive advantage in the shortest possible time. The importance of MIS has also been reflected in its place in the corporate hierarchy. The top-level executive post of Chief Information Officer (CIO) has perhaps not yet achieved parity with the Chief Financial Officer (CFO), but healthy budgets for mIS even in constrained economic times testify to its continuing importance.

Further readings

• Kroenke, David. Using MIS. Upper Saddle River, N.J.: Prentice Hall, 2005. 
• Laudon, Kenneth C., and Jane P. Laudon. Management Information Systems: Managing the Digital Firm. 10th ed. Upper Saddle River, N.J.: Prentice Hall, 2006. 
• “MIS Resources.” Available online. URL: http://www3.uakron.edu/ management/index.html. Accessed August 14, 2007. 
• Turban, Efraim, et al. Information Technology for Management. 6th ed. New York: Wiley, 2007