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CHAPTER 2

THEORETICAL FOUNDATION

2.1 Information

In Information technology (IT), information means a collection of a facts or raw

data that organized in some way so that they can give a meaningful function to

every user [Shelly, Chasman, Rosenblatt, Thomson, 2005]

2.2 Information Systems

There are several definitions of information systems. According to Satzinger,

Jackson and Burd, system is a collection of interrelated components that function

together to achieve some outcome. System Analysis is the process of

understanding and specifying in detail what the information system should do.

Information system itself is defined as a collection of interrelated components

that collect, process, store, and provide as output the information needed to

complete business tasks [Satzinger, Jackson and Burd, Boston: Thomson Course

Technology, 2004].

From another source, we can define Information System as a collection of

methods, practices, algorithms and methodologies that transforms data into

information and knowledge desired by and useful for, individual and group users

in organizations and other entities (UMBC, 2008).

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Component of information systems (Turban, 2003) consist of:

• Hardware: set of devices that accepts, processes, and displays data and

information

• Software: set of programs that enables hardware to do its task

• Database: collection of related files, tables, and relations that stirs data and

the associations among them

• Network: connection system that allows sharing of resources through

different computer

• Procedures: set of instructions regarding the way to combine above

components so that they can process information and generate output

• People: individual who work with and create output from the system

Information systems are constantly changing and evolving as technology

continues to rapidly growing. This evolving technology makes different types of

activities within an organization that may result in different types of information

systems. There are five common types of information system according to Mark

Kelly (Mark Kelly, 2008) are as follow:

2.2.1 Transaction Processing System (TPS)

A Transaction Processing System (TPS) collects and stores information

about transactions, and controls some aspects of transactions, which are

events of interest to the organization. TPS capture and record all the

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transaction that has an effect on the organization TPS is a basic business

system that performs daily routine transactions necessary for business

functions. At the operational level, tasks, resources and goals are

predefined and highly structured. The information is stored in

organizational database.

There are five types of TPS classified by their major functions, as shown in

Figure 2.1.

Figure 1 Types of TPS System

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A TPS is a basic business system. Some characteristics of it are it:

serves the most elementary day-to-day activities of an organization;

supports the operational level of the business;

supplies data for higher-level management decisions;

is often critical to the survival of the organization;

is mostly used for structured tasks;

can have strategic impacts (e.g. airline reservation system);

usually has high volumes of input and output;

provides data which is summarized into information by systems used

by higher levels of management; and

Needs to be fault-tolerant.

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2.2.2 Office Automation System (OAS)

Office Automation System (OAS) provides individuals with effective

ways to process personal and organizational data, perform calculations,

and create documents. OAS is adopted to increase the personal

productivity. Furthermore, we can reduce the paper work when we

implement this system. OAS software tools are often integrated (e.g.

Word processor can import a graph from a spreadsheet) and designed for

easy operation. Examples of OAS software are word processing,

spreadsheets, file managers, personal calendars, and presentation

packages.

2.2.3 Management Information System (MIS)

Management Information System (MIS) is another type of information

system that converts TPS data into information in order to observe the

performance of the business and control the organization. MIS analyze

and report transactions formerly recorded in TPS. It has hefty quantities

of input data, and produces summary reports as the output. MIS offer

managers with reports and, in a few cases, on-line access to the

organisations recent performance and historical records. Typically these

MIS systems focus utterly on internal events, providing the information

for short-term planning and decision making. Thus, MIS is typically

utilized by the middle-level managers. One of the examples of an MIS is

an annual budgeting system.

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2.2.4 Executive Information System (EIS)

Executive Information System (EIS), otherwise known as an Executive

Support System (ESS), provides senior executives with information in an

easy to get to yet interactive format. EIS recapitulate over the entire

organization until precise levels of detail. Thus, EIS serve the strategic

level of an organisation. Top level management usually implements this

type of information system. By using EIS, CEO of an organization could

tie in to all levels of the organization. Such systems are not designed to

solve specific problems, but to tackle a changing array of problems.

However, EIS is very expensive to run and require extensive supports

from the staffs to manage. ESS/EIS are designed to integrate data about

external events, such as new tax laws or competitors, and also represent

summarised information from internal MIS and DSS. These systems

filter, compress, and track critical data, emphasising the reduction of time

and effort required to obtain information useful to executive

management.

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2.2.5 Decision Support System

Decision Support System (DSS) support strategic management staff in

making decisions by providing information, models, or analysis tools.

DSS is focused for support of semi structured and unstructured decisions

(structured decisions can be automated). It is used for analytical work,

rather than general office support. They should be flexible, adaptable and

swift. They support the decision process and often are sophisticated

modeling tools so managers can make simulations and predictions. Their

inputs are aggregate data, and they produce projections. DSS use internal

information from TPS and MIS, but also information from external

sources. DSS is a superior analytical power than other systems,

incorporate modelling tools, aggregation and analysis tools, and support

what-if scenarios. DSS inputs are aggregate data, and they generate

projections. An example job for a DSS would be a 5 year operating plan.

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2.3 Data Flow Diagram

Data Flow Diagram (DFD) shows how the system transforms input data into

useful information. It shows how data moves through an information system but

it does not show program logic or processing steps. A set of DFD provides a

logical model that shows what the system does [Shelly, Chasman, Rosenblatt,

Thomson, 2005].

As said by Satzinger, Jackson and Burd, a DFD is s graphical system model that

shows all of the main requirements for an information system in one diagram:

inputs and outputs, process, and data storage. By using DFD, we are able to see

all aspects of the system working together. [Satzinger, Jackson, Burd (2004).

System Analysis and Design In A Changing World. 3rd ed. Boston: Thomson

Course Technology.]

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There are several components or basic symbols used to construct data flow

diagram:

2.4 Context Diagram

Context Diagram is a data flow diagram (DFD_ that shows the scope of a system

[Satzinger, Jackson and Burd, Boston: Thomson Course Technology, 2004]. It

shows the users of the system and the information that is exchanged between

them and the system. The Context Diagram is used during the project analysis

phase. It becomes the starting point for the more detailed investigation done

during analysis. furthermore, Context Diagram describes the most abstract view

of a system. All external agents and all data flows into and out of the system are

shown in one diagram, with the entire system represented as one process.

External Agent

Process

Data Flow

Data Stores

Real-time link

The source or destination of data outside the system.

Step-by-step instructions are followed that transform inputs into outputs (a computer or person or both doing the work)

Data flowing from place to place, such as input or output to a process

Data at rest, being stored for latter use. Usually corresponds to a data entity on an entity-relationship diagram

Communication back and forth between an external agent and a process as the process is executing (e.g. credit card verification).

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A context diagram clearly shows the scope of the system and boundary. The

system scope is defined by what is presented within the single process and what

is represented as external agents. External agents that that supply or receive data

from the system are outside the system scope, and everything else is inside the

system scope. The context diagram does not usually show data stores because all

of the system’s data stores are considered to be within the system scope (that is

part of the internal implementation of the process that represents the system).

Below figure is example of Context Diagram

Figure 2 Context Diagram

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2.5 Entity Relationship Diagram

According to Satzinger, Jackson, Burd, an entity relationship diagram (ERD) is a

graphical model of the data needed by a system, including things about which

information is stored and the relationships among them, produced in structured

analysis and information engineering. ERD consist of following objects: Entity,

Relationship, and Attributes [Satzinger, Jakson, Burd (2004). Systems Analysis

and Design in a Changing World. 3rd ed.Boston: Thomson Course Technology]

2.5.1 Entity

Connolly, Beg said that entity type is a group of objects with the same

properties, which are identified by the enterprise as having an independent

existence. Entity type is the basic concept of the ER model, which represents

a group of ‘objects’ in the ‘real world’ with the same properties. An entity

type has an independent existence and can be objects with a physical

existence or objects with a conceptual existence. Below figure shows the

example of entity type in ER model. [Connolly, Begg (2005). Database

Systems, A Practical Approach to Design, Implementation, and

Management.. 4th ed. Essex: Addison Wesley]

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Figure 3 Entity

2.5.2 Relationship

As said by Connolly, BeggRelationship is a set of meaningful associations

between one or more participating entity. Each relationship is given a name

that describes its function. Each Relationship is shown as a line connecting

the associated entity, labeled with the name of the relationship. Normally, a

relationship is named using a verb or a short phrase including a verb.

[Connolly, Begg (2005). Database Systems, A Practical Approach to

Design, Implementation, and Management.. 4th ed. Essex: Addison Wesley]

Figure 4 Relationship

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2.5.3 Attributes

According to Connolly, Beg, attribute is a property of an entity or a

relationship. The attribute hold values that describe each entity occurrence

and represent the main part of the data stored in the database. Each attribute

is associated with a set of values called a domain. The domain defines the

potential values that an attribute may hold and is similar to the domain

concept in the relational model [Connolly, Begg (2005). Database Systems,

A Practical Approach to Design, Implementation, and Management.. 4th ed.

Essex: Addison Wesley]

Figure 5 Attributes

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2.5.4 Multiplicity

Cardinality and Modality are the indicators of the business rules around a

relationship. Cardinality refers to the maximum number of times an instance

in one entity can be associated with instances in the related entity. Modality

refers to the minimum number of times an instance in one entity can be

associated with an instance in the related entity. Cardinality can be 1 or Many

and the symbol is placed on the outside ends of the relationship line, closest

to the entity, Modality can be 1 or 0 and the symbol is placed on the inside,

next to the cardinality symbol. For a cardinality of 1 a straight line is drawn.

For a cardinality of Many a foot with three toes is drawn. For a modality of 1

a straight line is drawn. For a modality of 0 a circle is drawn. [uregina

(2007), http://www2.cs.uregina.ca/~bernatja/crowsfoot.html.]

Zero or more

1 or more

1 and only 1 (exactly 1)

Zero or 1

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2.5.5 ERD Notations

Entity

Weak Entity

Key Attribute

Multivalued Attribute

Derived Attribute

Relationships

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Multiplicity

Recursive Relationship

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2.6 System Flowchart

System Flowchart is a diagram that describes the flow of processes if a

system from the beginning of the process until the process is over.

Flowcharting usually requires several iterations, especially for a complex

activity. Below is an example of a flow chart of the flowcharting activity.

Figure 6 Example of a Flowchart

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2.7 Internet

According to Patrick McKeown [Thompson, 2003], Internet is not single

network, but rather a network of networks. In fact, the name Internet is a

shortened version of the term inter-networking, meaning that it allows you to

work with multiple networks simultaneously. To connect to the Internet, your

computer will usually first connect to a LAN through an ISP through modem and

telephone line. The LAN, mainframe, or ISP is, in turn, connected to a regional

network via a high-speed telephone line.

2.8 Intranet

Intranet is actually an internet used by single organization or company that

provides key to internet applications. An internet operates within the company

for internal company’s purposes and can exist as an isolated, self contained

internet, or may have links to the internet (Stallings, 2007)

2.9 Local Area Network (LAN)

LAN is basically a network that connects communications within 2000 feet so

that ever user device on the network can communicate with each other (Turban,

2003).

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2.10 Database

Database is a collection of data that is related, logically shared, and the

information regarding the particular data is designed to fulfill the need of an

organization [Connolly and Begg, Addison Wesley, 2002]

According to the two opinions stated above, the conclusion is that a database is a

collection of data that is related to each other with information attached that

describes a certain organization’s activity and it is stored within a computer

based system.

2.11 E- Commerce

According to Jeffrey F.Rayport and Bernard J.Jaworski [McGraw-Hill, 2003], e-

commerce can be formally defined as a technology mediated exchanges between

parties (individuals or organizations) as well as the electronically based intra- or

inter-organizational activities that facilitate such exchanges.

There are four categories of e-commerce:

a. Business-to-business (B2B)

It refers to the full spectrum of e-commerce that can occur between two

organizations.

b. Business-to-consumer (B2C)

B2C e-commerce refers to exchange between businesses and consumers,

such as those managed by Amazon and Yahoo. It can include the exchange

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of physical or digital products or services and are usually much smaller than

B2B transactions.

c. Peer-to-peer (P2P)

P2P exchanges involve transactions between and among consumers. It can

include third-party involvement such as the auction website eBay.

d. Consumer-to-business (C2B)

It refers to a group of consumers that band together to present themselves as

a buyer group.

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2.12 The 7’Cs Framework

According to Jeffrey F. Rayport and Bernard J. Jaworski [McGraw-Hill, 2003],

in order to make a good website we should consider the elements of customer

interface. An effectively designed website should both attract target segment

customers and discourage others. Compelling sites communicate the core value

proposition of the company and provide a rationale for visiting the site or even

shopping there. There are 7 aspects that will be faced in order to design an

effective site. Below is the framework and explanation of each aspect.

Context Aesthetically

dominant

Functionally dominant Integrated

Content Product dominant Information dominant Service dominant

Community Nonexistent Limited Strong

Customization Generic Moderately customized Highly

customized

Communication One-to-many

non-responding

user

One-to-many

responding user

One-to-one

non-responding

user

One-to-one

responding

user

Connection Destination Hub Portal

Commerce Low Medium High

Table 1 7 - C's Framework

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a. Context

It captures site’s layout and design. How a site is designed and how people may

feel about the design. It includes graphics, colors, design features, and ease of

navigation.

b. Content

It refers to what’s presented on the website. All digital subject matter such as:

text, pictures, sound, and video are considered as content, and together all those

forms present information about a company’s products and services.

c. Community

It is interaction between site users, the ways that the site enables user-to-user

communication. It can happen through one-to-one interactions or among many

users.

d. Customization

It is the sites ability to tailor itself to different users or to allow users to

personalize the site.

e. Communication

Communication refers to dialogue between a website and its users. It can take 3

forms: site-to-user communication, user-to-site communication, or two-way

communication.

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f. Connection

It is the degree that site is linked to other sites.

g. Commerce

A website’s commerce capabilities allow it to sell goods, products, and services.

2.13 Research Methodology

There are 6 steps in research:

1. Identifying research problem

2. Reviewing the literature

3. Specifying a purpose for research

4. Collecting data

5. Analyzing and interpreting data

6. Reporting and evaluating research

In collecting data, gathering information can be done in several ways such as

interview, collecting questionnaire, surveys, etc. However, in this essay, there are

two methods in gathering information, which are interview and observations.

Interview will be used because it can gather more and accurate data and

information from the company with the correct question. Furthermore,

observations also will be used alongside with the interview as it is done in the

company.

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2.13.1 Interview

According to Donald R. Cooper and Pamela S. Schindler [McGraw-Hill,

2006], Interview is the primary data collection technique for gathering

data in qualitative methodologies. It’s vary based on the number of

interview conducted during the research, the number of people involved

during the interview, the level of structure and the proximity of the

interviewer to the participant.

Certain interviews are conducted individually (individual depth

interview, or IDI) or in group. It also can be conducted face-to-face with

the benefits of being able to observe and record nonverbal as well as

verbal behavior. However, interview can be conducted by phone or

online. It offers the opportunity to conduct more interviews within the

same time frame and draw participants from a wider geographic area.

2.13.2 Observation

Observation is a fact-finding techniques used by system analysts as an

addition to interview. Personal observation will provide a better

understanding and additional perspective of the current system

procedures. Moreover, it also allows us to verify statements made in

interviews and determine whether procedures really operate as they

describe [Shelly, Chasman, Rosenblatt, Thomson, 2005]

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Observation is better started with preparing checklist of specific tasks

about what is going to be observed and questions to be asked. Issues to be

considered are:

Sufficient questions to ensure complete understanding of current system

Observe all the steps in a transaction and note the documents, inputs,

outputs, and processed involved

Examine each form, record, and report

Consider who works with the system

Talk to people who receive current reports