REVIEW OF IS AND BUSINESS CHALLENGES
1. Assistant Dean, Information Systems and Technology Dept, Sur University
College, Sur, Sultanate of Oman, ZIP/PIN Code. 411
Information systems have different applications in business. Today’s
business is greatly depending on information resources and its aids. IS
strategies should support the organization’s business strategies and to
attain its goals. To achieve the organizational goals, information system has
to be developed in coherent and concrete way with respect to the business
challenges. Globalization plays a vital role in developing the information
systems to meet the business challenges in technological, management and
business perspectives. Also, globalization has very strong affect on
information systems in indispensable ways to accept and adapt the new
technological developments to use the opportunities, to get the benefits and
to embrace the world economy by improving business performance. The
timely decision making will provide many opportunities to prosper and
develop business performances.
In this paper we review some issues regarding relationship between
information systems and business. Also this paper discusses some business
challenges which play a vital role in this technically developed world. The
different types of information systems have been analyzed with their
applications and usages.
Keywords: Information Systems, Business Challenges, Key System Applications, Types
of Information System
1.1. General Introduction
Information systems play an important role in this information age. Until the
1980s, managers did not need to know much about how information was collected,
processed, and distributed in their organizations and the technology involved was
minimal. Information itself was not considered an important asset for the organization.
The management process was considered to be a face-to-face, personal art, and a not far-
flung, global coordination process.
Today, it is widely recognized that information system knowledge is essential for
every worker of an organization in particular managers because all organizations use
Information Systems to survive and prosper. Information Systems can help companies to
extend their reach to faraway locations, offer new products and services, and reshape jobs
and work flows. Perhaps Information Systems profoundly change the way companies
In this paper we discuss some issues regarding relationship between information
systems and business. Also this paper discusses some business challenges which play a
vital role in this technically developed world. The different types of information systems
have been discussed with their applications and usages.
1.2. Analyzing IS in Different Perspectives
Information system is viewed in different ways based on their applications and
place where it is observed. The latest developments in electronic world made information
system to be essential and most important requirement of any work. From a business and
management perspective, Information Systems are far more than just input-process-
output machines operating in a vacuum, an Information System is an organization and
management solution based on Information Technology to a challenge posed by the
Information systems have taken on a critical role in the competitive global
marketplace because of powerful worldwide changes in the business environment.
Leading industrial countries are transforming from the industrial-based to knowledge-and
According to Abell and Ginman on information and business performance (Owens
and et al, 1995),
- The way information is managed and used is very much a product of the culture
and management style of the organization;
- Changes in organizational structures and methods of using human resources,
together with the virtually universal implementation of information technology,
could have a significant effect on the way information is perceived and used by
Cohen, Jason and Toleman Mark (2006), in their research demonstrated that the
IS-business relationship plays an important role in ensuring that IS makes a meaningful
contribution to organizational performance.
1.3. Statement of Problem
Due to changes in organization structure, the managerial responsibilities have
been increased significantly in all directions of the business. The economical crisis
overburdened the managers to complete their task with minimum resources including
human resources. Now, there is a necessity review the business challenges and
information systems that support the business. The managers have made to fit themselves
into the available information systems to overcome the business challenges. Irrespective
of their levels of management, the managers are required to bend in task completion. The
information systems support in business challenges is increasing rapidly in this
competitive world. Thus, there is a need to review the information systems and business
challenges in order to identify the required changes and supports.
As the business environment is changing daily due to innovations in information
technology, there is a need to review the challenges faced in the business regularly. The
review processes will help the organization to have a sustainable growth. Business
challenges faced by some companies were studied for this review purposes. Various
studies conducted by the researchers have been studied to complete this review processes.
This review has been conducted as a pilot study to identify the supports of information
systems in business challenges. The basic idea of this review is also to study intensively
further to recognize the required modifications in these systems and their supports. The
purpose of this study is to open a ground for extensive discussions and suggestions for
the essential alterations required in the information systems to assist the managers in all
ways. The threats and opportunities in the turbulence times shall be further discussed in
3. Why Information Systems?
Business needs different types of Information Systems to support decision
making and work activities for various organizational levels and functions. To respond to
new competitive pressures, many are implementing enterprise-wide systems that integrate
Information and business processes from different functional areas. Companies for
instance, need information systems that would allow them to move their products more
efficiently through their supply chain. The companies found a solution in building
systems that could link important business processes for sales, production and logistics.
This presents the potential reward to firms with well-conceived systems linking the entire
enterprises. Apart from these, the knowledge available in many places needs to be
reviewed and utilized based on the requirements. Such systems typically require a
significant amount of organizational and management change and raise the following
Although it is necessary to design different systems serving different levels,
functions and business processes in a firm, most of the firms find advantages in
integrating systems. However, integrating systems for various organizational levels,
functions and business processes to freely exchange information can be technologically
difficult and costly. Managers need to determine what level of system integration is
required and what the monetary value will be.
3.2. Enlarging the scope of management thinking
Most managers are trained to manage a product line, a division, or an office. They
are rarely trained to optimise the performance of the organization as a whole, and often
are not given the means to do so. But enterprise systems and industrial networks require
managers to take a much larger view of their own behavior to include other products,
divisions, departments, and even outside business firms. Investments in enterprise
systems are huge, they must be developed over long periods of time, and they must be
guided by a shared vision of the objectives. Abell in her research concludes that the
current management thinking puts information and cross-functional access to information
at the core of business operations (Owens and et al, 1995).
3.3. IS – Business Relationship:
Information systems and business have a strong relationship in developmental
process of a business. Now–a–days information systems are considered as one of the key
component of a business and given much more importance than before. The latest studies
on this relationship prove that the growth of a business either in micro level or macro
level depends significantly on information systems. Apart from that the ownership of IS
strategy rests in the highest level within the business in the most effective organizations.
(Ralph and George, 2008)
Short shelf life
New global and
Consolidate delivery Loads
Calculate consumer demand
Figure 1: Different Systems in a Business (Jane, Kenneth 2009)
Building and managing systems today involves as much larger part of the
organization than it did in the past. As firms become more like "digital firms" the system
enterprise extends to customers, venders, and even industry competitors. Information
systems have come to play a larger role in the life of organizations. Early systems
brought about largely technical changes that were relatively easy to accomplish. Later
systems affected managerial control.
4. Information Systems for business:
Information processing is a major societal activity. Information systems support
plays a vital role in business strategies and intended to know how current IT systems are
used in developing the business strategies. A significant part of an individual's working
and personal time is spent recording, searching for, and absorbing information. More that
80 percent of a typical executive's time is spent in the processing and communication of
information. More than 50 percent of the work force has made to primarily involve some
form of information processing. A large proportion of these employees are "knowledge
workers"; their duties involve the production and use of information outputs; documents,
reports, analyses, plan, etc. Computers have become an essential part of organizational
information processing because of the power of the technology and the volume of data to
be processed the application of computers to information processing began in 1954 when
one of the first computers was programmed to process payroll. Today, computerized data
transaction processing has become routine activity of large organizations. Moreover, the
capability to automate information processing has permitted an expansion in the scope of
formalized organizational information use.
The current challenge in Information processing is to use the capabilities of
computers to support knowledge work, including managerial activities and decision
making. The wide variety of computer resources to perform transaction processing, to
provide processing for a formal information and reporting system, and to accomplish
managerial-decision support are broadly classified as the organization’s management
information systems or MIS. Increasing Complexity of business activities and improved
computer capabilities are the main factors that stimulate interest in information
4.1. Management Functions:
A French management theorist "fayol" recognized that managers perform five
major management functions. First managers plan what they have to do. Then organize
to meet the plan. Next, they staff their organization with the necessary resources. With
the resources in place, they direct them to execute the plan. Finally they control the
resources, keeping them on course. All managers, regardless of their level or functional
area perform these functions to some degree, although perhaps with varying emphasis.
Figure (2) illustrates how management level can influence the emphasis on the various
management functions. The managerial roles and responsibilities shall be identified
clearly and the managerial function where they emphasis.
Figure 2: Fayol's Management Function(Kenneth, Jane, 2008)
4.2. Key System Applications in the Organization:
Because there are different interests, specialties, and levels in an organization,
there are different kinds of systems. No single system can provide all the information an
organization needs. Figure (3) illustrates one way to depict the kinds of systems found in
an organization. Systems are built to serve these different organizational interests.
Organizations can be divided into four different levels Operational- level,
Knowledge-level, Management-level and Strategic-level. Organization shall also be
divided into five major functional areas such as Sales and marketing, manufacturing,
finance, accounting, Human resources. (Anthony, 1965).
Information Systems serve each of these levels and functions, operational managers,
knowledge and data workers, middle managers, and senior managers.
Figure 3: Types of Information System (Kenneth, Jane, 2009)
4.2.1. Operational-level Systems:
Information systems that monitor the elementary activities and transactions of an
organization is called operational level systems. They support operational managers by
keeping track of the elementary activities and transactions of the organisation, such as
sales, receipts, cash deposits, payroll, credit decisions, and the flow of materials in a
factory. TPS records the daily activities of an organization. The principal purpose of
systems at this level is to answer routine questions and to track the flow of transactions
through the organization.
4.2.2. Knowledge-level Systems:
This is the information systems that support knowledge and data workers in an
organization. They support the organization knowledge and data workers. The purpose of
knowledge-level systems is to help the business firm integrate new knowledge into the
business and to help the organization control the flow of paperwork. Knowledge-level
systems, especially in the form of workstations and office systems are the fastest-growing
applications in business today.
4.2.3. Management-level Systems:
This information system supports the monitoring, controlling, decision-making,
and administrative activities of middle managers. They serve the monitoring, controlling,
decision-making, and administrative activities of middle managers. The principal idea of
this system is to know whether the things go well.
Management-level Systems typically provide periodic reports rather than instant
information on operations. Management – level system provides various statistical
reports, periodic reports, on-demand reports and exceptional reports to assist the strategic
level to make necessary decisions. An example is a relocation control system that reports
on the total moving, house-hunting, and home financing costs for employees in all
company divisions, noting wherever actual costs exceed budgets. Some management-
level systems support nonroutine decision making (Keen and Morton, 1978). They tend
to focus on less-structured decisions for which information requirements are not always
clear. In general, these systems often answer “what if” questions. Answers to these
questions frequently require new data from outside the organization, as well as data from
inside. That cannot be easily drawn from existing operational-level systems.
4.2.4. Strategic-level Systems:
Information Systems that support the long-range planning activities of senior
management is called strategic level systems. They help senior management tackle and
address strategic issues and long-term trends, both in the firm and in the external
environment. Their principal concern is matching changes in the external environment
with existing organizational capability.
- What will employment levels are in five years?
- What are the long-term industry cost trends, and where does our firm fit in?
- What products should we be making in five years?
Information Systems also serve the major business functions, such as sales and
marketing, manufacturing, finance, accounting, and human resources. A typical
organization has operational-level, management-level, knowledge-level, and strategic-
level systems for each functional area. For example, the sales function generally has a
sales system on the operational level to record daily sales figures and to process orders. A
knowledge-level system designs promotional displays for the firm’s products.
A management-level system tracks monthly sales figures by sales territory and
reports on territories where sales exceed or fall below anticipated levels. A system to
forecast sales trends over a five-year period serves the strategic level.
5. Types of Information Systems:
There are six major Information Systems. Figure (4) shows the specific types of
information systems that correspond to each organizational level. The organization has:
- Transaction Processing Systems (TPS) at the operational level.
- Knowledge work Systems (KWS) and Office Automation Systems (OAS) at
the knowledge level.
- Management Information Systems (MIS) at the management level
- Decision Support Systems (DSS) at the management level, and the strategic
- Executive Support Systems (ESS) at the strategic level.
Systems at each level in turn are specialized to serve each of the major functional
areas. Thus, the typical systems found in organizations are designed to assist workers or
managers at each level and in the functions of sales and marketing, manufacturing,
finance, accounting, and human resources.
Figure 4 also summarizes the features of the six types of information systems. It
should be noted that each of the different kinds of systems may have components that are
used by organizational levels and groups other than their main constituencies. A secretary
may find information on an MIS, or a middle manager may need to extract data from a
Management Level System
Strategic Level System
Operational Level system
Knowledge Level system
Type of IS
KWS & OAS
MIS & DSS
Finance ManufacturingSales & Marketing
Figure 4: The six major types of information systems: TPS, office systems, KWS, DSS, MIS, and ESS, show
the level of the organization and business function that each supports (Kenneth, Jane, 2009)
¾ Transaction Processing Systems (TPS):
TPS are the basic business systems that serve the operational level of the
organizations. A transaction processing system is a computerized system that performs
and records the daily routine transactions necessary to conduct the 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 by a lower-
level supervisor according to predefined criteria. All that must be determined is whether
the customer meets the criteria. Figure (5) depicts a payroll TPS, which is a typical
accounting transaction processing system found in most firms. The master file is
composed of discrete pieces of information (such as a name, address, or employee
number) called data elements. Data are keyed into the system, updating the data elements.
The elements on the master file are combined in different ways to create reports of
interest to management and government agencies and to send paychecks to employees.
These TPS can generate other report combinations of existing data elements.
Figure 5: A symbolic representation for a payroll TPS. (Kenneth, Jane, 2009)
Other typical TPS applications are identified in table (1). The table shows that
there are five functional categories of TPS: sales/marketing, manufacturing/production,
finance/accounting, human resources, and other types of TPS that are unique to a
particular industry. The UPS package tracking system is an example of a manufacturing
TPS. UPS sells package delivery services; the system keeps track of all of its package
shipment transactions. Transaction processing systems are often so central to a business
that TPS failure for a few hours can spell a firm’s demise and perhaps other firms linked
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 in Figure (6),
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.
Table (1), depicts typical applications of TPS. There are 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 subfunctions. For each of these subfunctions (e.g., sales
management) there is a major application system.
Employee data (various departments) To general ledger: wages and salaries
Table1: Typical applications of TPS (Kenneth, Jane 2008).
¾ Knowledge Work (KWS) & Office Systems (OA):
Serve the information needs at the knowledge level of the organization.
Knowledge work systems aid knowledge workers, whereas office automation systems
primarily aid data workers (although they are also used extensively by knowledge
In general, knowledge workers are people who hold formal university degrees and
who are often members of a recognized profession, such as engineers, doctors, lawyers,
and scientists. Their jobs consist primarily of creating new information and knowledge.
Knowledge work systems (KWS), such as scientific or engineering design workstations,
promote the creation of new knowledge and ensure that new knowledge and technical
expertise are properly integrated into the business.
Data workers typically have less formal, advanced educational degrees and tend
to process rather than create information. They consist primarily of secretaries,
accountants, filing clerks, or managers whose jobs are principally to use, manipulate, or
disseminate information. Office systems are information technology applications
designed to increase data workers’ productivity by supporting the coordinating and
communicating activities of the typical office. Office systems coordinate diverse
information workers, geographic units, and functional areas. The systems communicate
with customers, suppliers, and other organizations outside the firm and serve as a
clearinghouse for information and knowledge flows.
Typical office systems handle and manage documents through word processing,
desktop publishing, document imaging, and digital filing, scheduling through electronic
calendars, and communication through electronic mail, voice mail, or videoconferencing.
¾ Management Information Systems (MIS):
Scientists defined management information systems as the study of information
systems in business and management. The term Management Information Systems (MIS)
also designates a specific category of information systems serving management-level
functions. MIS serve the management level of the organization, providing managers with
reports and, in some cases, with on-line access to the organization’s current performance
and historical records. Typically, they are oriented almost exclusively to internal, not
environmental or external, events. MIS primarily serve the functions of planning,
controlling, and decision making at the management level.
Generally, they depend on underlying transaction processing systems for their
data. MIS summarize and report on the company's basic operations. The basic transaction
data from TPS are compressed and are usually presented in long reports that are produced
on a regular schedule. Figure (6) shows how a typical MIS transforms transaction-level
data from inventory, production, and accounting into MIS file that are used to provide
managers with reports.
Figure 6: How management information systems obtain their data from the organization’s TPS (Kenneth,
In the system illustrated by this diagram, three TPS supply summarized
transaction data at the end of the time period to the MIS reporting system. Managers gain
access to the organizational data through the MIS, which provides them with the
MIS usually serve managers interested in weekly, monthly, and yearly results not
day to-day activities. MIS generally provide answers to routine questions that have been
specified in advance and have a predefined procedure for answering them. These systems
are generally not flexible and have little analytical capability. Most MIS use simple
routines such as summaries and comparisons, as opposed to sophisticated mathematical
models or statistical techniques.
MIS and Problem Solving:
1. Organization wide information resources
a. Provides problems solving information
b. Sets stage for accomplishment in other areas such as DSS, the virtual
office, and knowledge-based
2. Problem identification and understanding
a. Main idea is to keep information flowing to the manager
b. Manager uses MIS to signal impending problems
3. Main weakness is that it is not aimed at individual problem solvers
¾ Decision-Support Systems (DSS):
Systems that supports a single manager or a relatively small group of managers,
working as a problem-solving team in the solution of a semistructured problem, by
providing information or making suggestions concerning specific decisions. "Gorry and
Scott Morton coined the phrase ‘DSS’ in ".
Decision types in terms of problem structure:
• Structured problems can be solved with algorithms and decision rules
• Unstructured problems have no structure in Simon’s phases
• Semistructured problems have structured and unstructured phases
The Gorry and Scott Morton .Illustrates Different kinds of information
systems at the various organization levels support different types of decisions. A
refinement of Gorry and Scott Morton's DSS definition was provided by Little ,
who define DSS as a "model base set of procedures for processing data and judgments to
assist a manager in his decision making".
Three other definitions of DSS were offered by Moore and Chang ,
Bonczek, Holsapple, and Whinston , and Keen . Figure (7) illustrates the
conceptual scheme of 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.
They address problems where the procedure for arriving at a solution may not be fully
predefined in advance. 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. Clearly, by design, DSS have more analytical power than other
systems. They are built explicitly with a variety of models to analyze data, or they
condense large amounts of data into a form where they can be analyzed by decision
makers. DSS are designed so that users can work with them directly; these systems
explicitly include user-friendly software. DSS are interactive; the user can change
assumptions, ask new questions, and include new data.
Figure 7: Conceptual Scheme of a DSS (mcrit)
¾ Executive Support Systems (ESS):
Senior managers use executive support systems (ESS) to make decisions. ESS
serves the strategic level of the organization. They address nonroutine decisions requiring
judgment, evaluation, and insight because there is no agreed-on procedure for arriving at
a solution. ESS creates a generalized computing and communications environment rather
than providing any fixed application or specific capability. ESS are designed to
incorporate data about external events such as new tax laws or competitors, and they also
draw summarized information from internal MIS and DSS. They filter, compress, and
track critical data, emphasizing the reduction of time and effort required to obtain
information useful to executives. ESS employs the most advanced graphics software and
can deliver graphs and data from many sources immediately to a senior executive’s office
or to a boardroom.
Unlike the other types of information systems, ESS is not designed primarily to
solve specific problems. Instead, ESS provides a generalized computing and
telecommunications capacity that can be applied to a changing array of problems.
Whereas many DSS are designed to be highly analytical, ESS tends to make less use of
6. Relationship of Systems to One Another:
Figure (8) illustrates how the systems serving different levels in the organization
are related to one another. TPS are typically a major source of data for other systems,
whereas ESS is primarily a recipient of data from lower-level systems. The other types of
systems may exchange data with each other as well. Data may also be exchanged among
systems serving different functional areas.
For example, an order captured by a sales system may be transmitted to a
manufacturing system as a transaction for producing or delivering the product specified
in the order. It is definitely advantageous to have some measure of integration among
these systems so that information can flow easily between different parts of the
organization. But integration costs money, and integrating many different systems is
extremely time consuming and complex. Each organization must weigh its needs for
integrating systems against the difficulties of mounting a large-scale systems integration
Figure 8: Inter-relationships among systems (Efrain and et al, 2007)
The various types of systems in the organization have interdependencies. TPS are
a major producer of information that is required by the other systems which, in turn,
produce information for other systems. These different types of systems are only loosely
coupled in most organizations.
7. Business Challenges
Four powerful worldwide changes have altered the business environment. The
first change is the important and strengthening of the global economy. The second
challenge is the transformation of industrial economies and societies into knowledge and
information-based services economies. The third is the transformation of the business
enterprise. The fourth is the emergence of the digital firm. Information Technology and
Systems have changed the foundation of doing business in all ways.
Globalization of the world's industrial economies greatly enhances the value of
Information Systems to the firm and offers new opportunities to businesses. Today,
Information Systems provide the communication and analytical power that firms need for
conducting trade and managing businesses on a global scale. Globalization has a very
strong impact in any business and plays a vital role in business development. Due to
globalization the world has become very small, and all needs are available in hand at any
time, at any place and at any situation. Also, the globalization has developed a great
competition among the products and it made the product standards to be international
level to meet the customer’s needs and customer’s satisfaction.
7.2. Transformation of Economies
The rise of the information economy has immensely increased the innovations of
new products to meet the global requirements and challenges. Also, it has improved the
customer services by developing information and knowledge based economy. Due to
these changes, knowledge has become an asset of the organization. The transformation of
economies increased the viability foundation of doing business in various aspects. It has
increased the strategic opportunities of creating new business models, productivity and
7.3. Transformation of Business Enterprises
The business structure and market structure are changed due to IT innovations
and development. Information Technology flattened the organization structure and
increased the speed of decision making. Even the lower level employees are empowered
to make decision without consultation of higher authorities. The smaller organizations
could compete with larger organizations by overcoming their limitations caused by their
size. Irrespective of the size, all the organizations could develop their own business
processes to achieve their goals and objectives.
7.4. Emergence of the Digital Firm
The emergence of the digital firm changed the core business processes by
enabling the customers, suppliers and employees relationship. The internet and
technology helps in the growth of e – business, e – commerce and e – governance. The
digital technology superseded the traditional business models and processes. Business
processes are changed with decentralized empowerments and authorities.
8. Findings & Conclusion:
Information systems have become essential for helping organization deal with
changes in global economies and the business enterprise. Information systems provide
firms with communication and analytic tools for the conducting trade and managing
businesses on a global scale. Information systems are the foundation of new knowledge-
base products and services in knowledge economies and help firms manage their
knowledge assets. Information systems make it possible for businesses to adopt flatter,
more decentralized structures and more flexible arrangements of employees and
Organizations are trying to become more competitive, more effective, and
efficient by transforming themselves into digital firms where nearly all core business
processes and relationships with customers, suppliers, and employees are digitally enable.
The purpose of information systems is to collect, store, and disseminate
information from an organization’s environment and internal operations to support
organizational functions and decision making, communication, coordination, control,
analysis, and visualization. Information systems transform raw data into useful
information through three basic activities: Input, Processing, and Output from business
perspective, an information system represents an organizational and management solution
based on information technology to a challenge posed by the environment. The
information system become part of a series of value-adding activities for acquiring,
transforming, and distributing information that managers can use to improve decision
making, enhance organizational performance, and ultimately increase firm profitability.
Information systems literacy requires an understanding of the organizational and
management dimensions of information systems as well as the technical dimensions
addressed by computer literacy. Information systems literacy draws on both technical and
behavioral approaches to studying information systems. Both perspectives can be
combined into a socio-technical approach to systems.
9. Further Scopes:
The paper discusses about information systems and business strategies in general
as a pilot study. This may be further extended to identify the business challenges in each
information system and with respect to each functions of the business that rely on these
information systems in depth. A analysis shall be conducted separately to find the
challenges of the application of IS in the business with the specific cases.
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