MS 07 INFORMATION SYSTEMS FOR MANAGERS

Q.2

Discuss the relationship between data and information, information and knowledge.

Also explain the concepts of cost and value of information by the help of an example.

Answer Data is the unprocessed information. In managements perspective only information is needed by the management. Businesses do not run on raw data, they run on data that have been processed to information. For any decision making one has to gather some facts. These basic raw materials in the primary form provides only data, which is, as such, not much of immediate value. Unorganized, scattered data when processed and analyzed acquire the status information. On the basis of this information and further processing one formulates a know-how, which can be applied to solve a problem either at micro or corporate level.

DATA Raw facts

DATA TRANFORMATION People, Procedures, hardware, software, paper etc

INFORMATION Useful and relevant

Information consists of facts and data organized to describe a particular situation or condition. Noises which we hear is the data whereas the meaning of the noises (eg. Running car engine) is information. "Information" is "raw", i.e. un-acted upon by any receiver. The value of any given piece of information resides in the relationship between the user and the information. For example for an umbrella manufacturer the information regarding sales target is coming in the summer it is a waste. The information should be timely and precisely submitted. Combination of content and easier interpretation of it makes the user finds valuable.

Information and Knowledge

For a bank customer having account no. 12344 wants to check how much remain in balance (that is information). The person at the helpdesk is having the knowledge to solve his enquiry. The Page 1 of 5

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customer-care executive possesses knowledge on how to operate her workstation, how to talk to customer, how to verify that caller is authorized person, how to interpret customer request, how to interpret account data, and how to explain it to customer. That knowledge may be considered "How-to" knowledge. In addition, the executive possesses (or can obtain from others or from support systems) other kinds of knowledge such as concepts about customers, customer accounts, and brokerage in general. The executive obtains from her system information such as: Account holder's name, needed password, type of account, account restrictions, account balances etc. Knowledge is a fluid mix of framed experience, values, contextual information, expert insight and grounded intuition that provides an environment and framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organizations it often becomes embedded not only in documents and repositories but also in organizational routines, processes, practices and norms.

We use knowledge to determine what a specific situation means. Knowledge is applied to interpret information about the situation and to decide how to handle it. When new facts realized or acquired it does not become knowledge but it alters the existing knowledge by increasing (or shifting) the individuals knowledge state, thereby opening new possibilities to act. We need information to get knowledge but it is rich and powerful than information.

Cost and Value of the Information

Given the extremes of the risks and benefits of IT investments, it is easy to see how critical it is to tell the difference between the right investment decision and the wrong one. A rational and systematic analysis of the expected costs and benefits is essential. However, even with extreme differences in returns on IT investments, most decision makers find it difficult to determine which investments will be a phenomenal success and which will be a failure. Key costs involved in IT are for software, hardware, consulting, training and personnel. Consulting is the single largest cost area making up more than half of cost spending on the project. The cost of initial software licenses and annual license maintenance fees has also to be considered. Personnel time spent on initial implementation and ongoing support amounted to 10 percent of total expenses. Training and hardware made up the remainder of expenditure on the deployment of Page 2 of 5

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information system. So project planning and the development of a clear rod map based on user requirements are key to a smooth deployment of Information Systems.

Cost Benefit Analysis

All the IT project and investments has to done within the limited capital of the organization. Since IT consumes large amount of money careful analysis and forecasting of it is required for the implementation. High risk associated with high cost enables the managers to consider the risk management. Risk management is the process that allows IT managers to balance the operational and economic costs of protective measures and achieve gains in mission capability by protecting the IT systems and data that support their organizations missions. This process is not unique to the IT environment; indeed it pervades decision-making in all areas of our daily lives. Take the case of home security, for example. Many people decide to have home security systems installed and pay a monthly fee to a service provider to have these systems monitored for the better protection of their property. Presumably, the homeowners have weighed the cost of system installation and monitoring against the value of their household goods. Costs have to be compared with the softwares range of features & functionalities. A document management system may not be the cheapest, but it should help to set up a virtual office. Going for loads of features also constitutes a trap, because users never get around to using half of them. Another question is whether there is an overlap between features & needs at all. Many features may not relate to needs sought to be addressed. Company should clearly define its needs, & classify features as needed features & features not needed. Another possible scheme of classifying features could be must have, nice to have, & future requirements.

Accenture multinational company for software development enables the cost reduction by working to run on current operations more efficiently by improving the use of software and hardware assets, thereby divesting non-essential assets and decreasing the average IT unit costs. They embedded structural changes by shifting the focus to an efficient and effective IT operating model. This drives significant improvements in labor costs, extracting savings through better operating models, industrialized processes, transformational technologies, and sourcing strategies Page 3 of 5

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Return On Investment (ROI)

This method tries to quantify additional profits that are generated as a percentage of the investment in information system technology. For example a company named NCI Information Systems for the deployment of new software they done this kind of analysis. The returns from the new software included both indirect benefits mainly productivity and direct, harddollar returns, such as increases in working capital. The largest direct return to NCI was in the area of improved working capital: new system applied a 15 percent cost of capital to quantify the savings resulting from faster inflow of annual billings. The other direct benefit quantified was the avoidance of additional personnel because without new information system, NCI would likely have to hire additional employees over the next two or three years to support budgeting and forecasting requirements. The company calculated indirect benefits, including the increased productivity of financial analysts and program managers, using the fully loaded cost of NCI employees. Time savings realized as a result of faster data access and easier reporting and budgeting were multiplied by a productivity correction factor to account for the inefficient transfer of time from time saved to additional time worked.

Data of ROI analysis is shown on the adjacent paper

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The dysfunctional IT systems have interfered with the business operations and cause the loss of customers and revenue. The Denver Airport is a well-known example of this. The airport's baggage handling system was a critical component in the plan. By automating baggage handling, aircraft turnaround time was to be reduced to as little as 30 minutes. Faster turnaround meant more efficient operations and was a cornerstone of the airports competitive advantage.
Despite the good intentions the plan rapidly dissolved as underestimation of the projects complexity resulted in snowballing problems and public humiliation for everyone involved.

Causes:- Denver International Airport (DIA) project failed because those making key decision underestimated the complexity involved. As planned, the system was the most complex baggage system ever attempted. Ten times larger than any other automated system, the increased size resulted in an exponential growth in complexity. At the heart of the complexity lay an issue known as line balancing. To optimize system performance, empty carts had to be distributed around the airport ready to pick up new bags. With more than 100 pickup points (check in rows and arrival gates) each pickup needed to be fed with enough empty carts to meet its needs. The algorithms necessary to anticipate where empty carts should wait for new bags represented a nightmare in the mathematic modeling of queue behaviors. Failure to anticipate the number of carts correctly would result in delays in picking up bags that would undermine the systems performance goals. Failure to recognize the complexity and the risk involved contributed to the project being initiated very late.

References
1) http://www.scribd.com/sustainable_IT Cost _Reduction/d/16296607 2) www.inspired2 learn.info/../Difference between Data and information.pdf 3) www.providesledge.com/... Understanding-the Difference-Between IM and_ KN.pdf 4) www.knowledge base-script.com/demo/export.php?ID=914&type=pdf 5) http://csrc.nist.gov/publications/nistpubs/800-30/sp800-30.pdf

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