A management information system can use data provided by a transaction processing system.

1.7Databases and Business Information Systems

In most business systems, the database provides the underlying foundation for business applications that support the daily operations and activities of the business. Most business systems are created to support either direct business processes, such as taking orders and making sales, or indirect business processes, such as payroll and human resources. Since both types of business processes capture and store information, a database is required. In order to better understand how database technology is used within a business, the following table identifies three ways to categorize business information systems and describes how the database enables them.

Table 1.1

Database Requirements for Three Types of Business Information Systems

As you learned in a previous section about the database approach, an information system consists of the front end application, the DBMS or database engine, and the data itself. In the above table, the three basic types of information systems include all three components—front end, DBMS, and data. It is also possible to consider only the method used to organize the data in the database apart from the front end application.

If the data is organized in a manner that facilitates the rapid processing of business transactions, it is called an Online Transaction Processing (OLTP) database. OLTP types of databases are designed and optimized to allow quick reading of the data and quick updates of individual pieces of data. For example, an OLTP database can rapidly display account information about a particular customer and quickly update that customer's account with immediate sales transactions. This type of database structure, OLTP, is very useful for TPS and MIS, which need to summarize daily transactions. OLTP databases are designed and built to be fast and efficient in supporting active business processes.

On the other hand, DSS usually require in-depth analyses, such as trend analyses or correlation analyses between different items. DSS require a different type of database structure and organization. Databases that are organized to optimize data analysis are called Online Analytical Processing (OLAP) databases. For example, a data analysis that looks at trends in purchases of different types of automobiles from year-to-year and then correlates that information with stock prices or interest rates would require a very different type of database structure. In this situation, it is unnecessary to rapidly extract individual customer information or even identify individual customer purchases. In other words, an OLAP database is designed to support data analysis.

Table 1.2 summarizes some of the differences between these two types of databases.

Table 1.2

Comparison of OLTP and OLAP Databases

Although some businesses, especially small businesses, may not utilize Decision Support Systems, all businesses require Transaction Processing Systems and some level of Management Information Systems. Can you imagine trying to run a business without transaction processing systems and databases to keep track of the information about the day-to-day operations? Databases and information systems are the lifeblood of virtually every business, large or small.

1. Discuss the relationship and the difference betweenTransaction processing system and Management informationSystem.TRANSACTION PROCESSING SYSTEMSTransaction processing systems (TPS) are the basic business systems thatserve the operational level of the organization.A transaction processing system is a computerized system thatperforms and records the daily routine transactions necessary toconduct business.Examples are sales order entry, hotel reservation systems,payroll, employee record keeping, and shipping.At the operational level, tasks, resources, and goals are predefined andhighly structured. The decision to grant credit to a customer, for instance, ismade by a lower-level supervisor according to predefined criteria. All thatmust be determined is whether the customer meets the criteria.MANAGEMENT INFORMATION SYSTEMSThe term management information systems (MIS) designates a specificcategory of information systems serving management-level functions.Management information systems (MIS) serve the management levelof the organization, providing managers with reports and often onlineaccess to the organization’s current performance and historicalrecords.Typically, MIS are oriented almost exclusively to internal, not environmentalor external, events. MIS primarily serve the functions of planning, controlling,and decision making at the management level. Generally, they depend onunderlying transaction processing systems for their data.MIS summarize and report on the company’s basic operations. Thebasic transaction data from TPS are compressed and are usuallypresented in long reports that are produced on a regular schedule.MIS usually serve managers primarily interested in weekly, monthly, andyearly results, although some MIS enable managers to drill down to see dailyor hourly data if required.RELATIONSHIP BETWEEN TPS and MISThe TPS is the major source of data for other systems in an organization.Since they record daily routine transactions in an organization, they aidmanagers in monitoring the status of the operations and thus help instructured decision-making. MIS usually receive and utilize the data they getfrom the TPS.

2.Distinguish between DSS and GDSS by emphasizing their rolesin facilitating management decisions.

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