Creating Effective Information Systems

A comprehensive and effective information system is essential to the success of any business.  The term “information system” refers to processes and tools that companies use to collect data, interpret and process it into information, and disseminate the information to those who need it on a timely basis and in a form in which it can be used by the recipient. The elements of an information system include personnel, data collection, storage and processing equipment, communications and dissemination facilities, procedures, security planning, and controls.  It is important to distinguish between “data,” which is essentially the raw material (e.g., facts and figures describing known events or occurrences) for “information,” and the “information” that is created from interpreting the data.

The first functional element of any effective information system is inputting the appropriate data.  Managers should establish procedures for timely collection of all data necessary to generate the required information.  The data should be checked carefully before it is entered into the system.  The second functional element is referred to as data maintenance.  The goal of this function is to be sure that data in the system that is no longer current or relevant will be replaced.  However, the maintenance function should include the capacity to archive and preserve historical information for future reference.  The third functional element is the output function, which focuses on creating and disseminating useful information for consumers within the organization.  In order to be prepared for output, the data must be retrieved, selected, processed, and reported in a manner that conforms to the information requirements of the organization.  The output can be disseminated in a variety of media, including written reports, newsletters, speeches, and as part of an electronic “infobase” that can accessed as needed.

Once the essential functions of an effective information system are understood, management must proceed with designing and implementing a system that satisfies the unique requirements of the company.  This process begins with conceptualization of the goals and objectives of the information system, including the specific types of data generated by the company’s activities and the outputs that are most valuable to the managers and employees of the company and outside stakeholders (e.g., regulators, lenders, investors etc.).  The next steps include feasibility studies, an analysis of the current systems used by the firm, and creation of a project team to coordinate the effort.  The project team must then select one or more vendors to design and construct the system.  Before the system goes online, the responsible managers and technical staff should be provide with intensive training, and provision should also be made for further in-house training of other personnel as needed to effectively utilize the system.  Also, the system should be thoroughly tested alongside the company’s existing systems and procedures to be sure that it works efficiently.  An information system is not static and should be regularly evaluated to ensure that it continues to meet the needs of the company as it grows and evolves.

The content in this post has been adapted from material that will appear in Business Transactions Solutions (Fall 2008) and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.

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