An information system is an arrangement of people, data, processes, interfaces, networks, and technology that interact for the purpose of supporting and improving both day-to-day operations in a business (sometimes called data processing), as well as supporting the problem solving and decision making needs of management (sometimes called information services).
Transaction processing systems (TPS) are the basic business systems that serve the operational level of an organization. This refers to computerized system that performs and records the daily routine transactions necessary to conduct 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 and highly structured. The decision to grant credit to a customer, for instance, is made a lower-level supervisor according to predefined criteria. All that must be determined is whether the customer meets the criteria.
A payroll system is a typical accounting TPS that processes transactions such as employee time cards and changes in employee salaries and deductions. It keeps track of money paid to employees, withholding tax, and paychecks.
There are mainly five functional categories of TPS: sales/marketing, manufacturing/production, finance/accounting, human resources, and other types of systems specific to a particular industry. Within each of these major functions are sub functions. For each of these sub functions (e.g., sales management) there is a major application system.
Transaction processing systems are often so central to a business that TPS failure for a few hours can lead to a firm‘s demise and loose business edge. Managers need TPS to monitor the status of internal operations and the firm‘s relations with the external environment. TPS are also major producers of information for the other types of systems. (For example, the payroll system illustrated here, along with other accounting TPS, supplies data to the company‘s general ledger system, which is responsible for maintaining records of the firm‘s income and expenses and for producing reports such as income statements and balance sheets.
Decision-support systems (DSS) also serve the management level of the organization. DSS help managers make decisions that are unique, rapidly changing, and not easily specified in advance. This supports semi structured and unstructured problem analysis. They address problems where the solution procedures may not be available. Although DSS use internal information from TPS and MIS, they often bring in information from external sources, such as current stock prices or product prices of competitors.DSS are a specialized class of computerized information system that supports business and organizational decision making activities. An ideal DSS is an interactive software-based system intended to help decision makers compile useful information from the raw data, documents, personal knowledge, and/or business models to identify and solve problems and make decisions..
Normally, DSS have more analytical power than other systems. They use a variety of models to analyze data and condense large amounts of data into an appropriate form for decision makers. DSS are designed in such a way that that users can work with them directly. This systems explicitly include user-friendly software. DSS are interactive; the user can change assumptions, ask new questions, and include new data.