University of DhakaFaculty of Business Studies

Term Paperon

Fundamentals of Management Information SystemsCourse No: 108

Submitted to: Moqbul Hossain Bhuiyan Chairman Dept.of Management Information Systems University of Dhaka

Submitted by: Nabila Tabassum Chowdhury ID no: 20 5th Batch Dept.of Management Information Systems

TOPIC

Decision Support Systems (DSS)&

Executive Support Systems (ESS)

AbstractThis paper presents the way in what information system helps a firm by taking part in decision making process in middle level & executive level of firm by using Decision Support Systems (DSS) & Executive Support Systems (ESS) & description of these two. Today in large business firms, they may have several business processes to attain its goal. Here, managers need the support of Information Technology.  It is very difficult to make good decisions without valid, timely and relevant information. Information system is automating those processes, collecting data from it and also from outside sources, finally process it into useful information to the users. A firm might have several business processes, and those processes determine the attribute, number, structure, uses & users of information systems. Generally, in decision making, process, here works the managers of mid level & executive level. This paper is going to look closely on how some types of information system - Decision Support Systems (DSS) & Executive Support Systems (ESS) helps the middle manager & senior manager to carry out their responsibilities in decision making process.

1. Introduction

To succeed, companies need information systems that can support the diverse information and decision-making needs of their managers and business professionals. Information systems provide the managers with valid, timely and relevant information. The type of information required by decision makers is directly related to the level of management and the amount of structure in the decision situations.

In middle management level computer system combines data, models, user - friendly software for semi-structured & unstructured decision making, they are generally called Decision Support Systems (DSS). It provide support primarily to analytical, quantitative types of decisions.

In executive level, strategic information system designed for unstructured decision making through advanced graphics and communications generally called Executive

Support Systems (ESS). It supports the informational roles of executives.

1.1 Managers and Decision Making

Management is a process by which organizational goals are achieved through the use of resource (people, money, energy, materials, space, time).

These resources are considered to be inputs; The attainment of the goals is viewed as the output of the process; The ratio between inputs and outputs is an indication of the organization’s

productivity

Managers three basic roles (Mintzberg 1973) Interpersonal roles figurehead, leader, liaison Informational roles monitor, disseminator, spokesperson Decisional roles entrepreneur, disturbance handler, resource allocator,

negotiator.Decision refers to a choice that individuals and group make among two or more alternatives.Decision making is a systematic process composed of three major phases: intelligence, design and choice (Simon 1977); an Implementation phase was added later.

Figure 1.1: The relation between type of information required & level of management.

1.2 Why Managers Need IT Support

It is usually necessary to conduct a sophisticated analysis in order to make a good decision. Such analysis requires the use of modeling.

Decision makers can be in different locations and so is the information. Bringing them all together quickly and inexpensively may be a difficult task

Information systems that provide support for managerial decision-making [i.e. decision support systems (DSSs), group DSSs, organizational DSSs, executive support systems(ESS)].

Information systems that actually make a decision

2. Decision Support Systems (DSS)

Decision Support Systems (DSS) support non routine decision making for middle manager. They focus on problems that r unique & rapidly changing, for which the procedure for arriving at a solution may not be fully predefined in advance. They try to answer questions such as these: What would be the impact on production schedules if we were to double sales in month of December? What would happen to our return on investment if a factory schedule were delayed for six month?

DSSs may use internal systems as well as external sources, such as current stock price or price of competitors. The system use various model to analyze data or they condense large amount of data into a form in which decision makers can analyze them. DSS are

designed so that users can work with them directly; these systems explicitly use user-friendly software.

We can also define Decision Support System (DSS) is an interactive computer-based system or subsystem intended to help decision makers use communications technologies, data, documents, knowledge and/or models to identify and solve problems, complete decision process tasks, and make decisions. Decision Support System is a general term for any computer application that enhances a person or group’s ability to make decisions. Also, Decision Support Systems refers to an academic field of research that involves designing and studying Decision Support Systems in their context of use.

2.1 A brief history

Academic Researchers from many disciplines has been studying DSS for approximately 40 years.According to Keen and Scott Morton (1978), the concept of decision support has evolved from two main areas of research: the theoretical studies of organizational decision making done at the Carnegie Institute of Technology during the late 1950s and early 1960s, and the technical work on interactive computer systems, mainly carried out at the Massachusetts Institute of Technology in the 1960s. It is considered that the concept of DSS became an area of research of its own in the middle of the 1970s, before gaining in intensity during the 1980s.In the middle and late 1980s, Executive Information Systems (EIS), group Decision Support Systems (GDSS), and Organizational Decision support systems (ODSS) evolved from the single user and model-oriented DSS. Beginning in about 1990, data warehousing and on-line analytical processing (OLAP) began broadening the realm of DSS. As the turn of the millennium approached, new Web-based analytical applications were introduced.

Figure2.1: Goal: Use best parts of IS, OR/MS, AI & cognitive science to support more effective decision

2.2 Characteristics of DSS

Sensitivity analysis is the study of the impact that changes in one (or more) parts of a model have on other parts.

What-if analysis is the study of the impact of a change in the assumptions (input data) on the proposed solution.

Goal-seeking analysis is the study that attempts to find the value of the inputs necessary to achieve a desired level of output

2.3 Taxonomy

As with the definition, there is no universally-accepted taxonomy of DSS either. Different authors propose different classifications. Using the relationship with the user as the criterion, Haettenschwiler differentiates passive, active, and cooperative DSS. A passive DSS is a system that aids the process of decision making, but that cannot bring out explicit decision suggestions or solutions. An active DSS can bring out such decision suggestions or solutions. A cooperative DSS allows the decision maker (or its advisor) to modify, complete, or refine the decision suggestions provided by the system, before sending them back to the system for validation. The system again improves, completes, and refines the suggestions of the decision maker and sends them back to her for validation. The whole process then starts again, until a consolidated solution is generated.

Another taxonomy for DSS has been created by Daniel Power. Using the mode of assistance as the criterion, Power differentiates communication-driven DSS, data-driven DSS, document-driven DSS, knowledge-driven DSS, and model-driven DSS A communication-driven DSS supports more than one person working on a shared task; examples include integrated tools like Microsoft's NetMeeting or Groove. A data-driven DSS or data-oriented DSS emphasizes access to and manipulation of a time series of internal company data and, sometimes, external data. A document-driven DSS manages, retrieves, and manipulates unstructured information in a variety of electronic formats. A knowledge-driven DSS provides specialized problem-solving expertise stored as facts, rules, procedures, or in similar structures. A model-driven DSS emphasizes access to and manipulation of a statistical, financial, optimization, or simulation model. Model-driven DSS use data and parameters provided by users to assist decision makers in analyzing a situation; they are not necessarily data-intensive.

2.4 The Capabilities of a DSS

It provide support for decision makers at various management levels, whether individuals or groups, mainly in semi-structured and unstructured situations, by bringing to gather human judgment and objective information.

It supports several interdependent decisions. It also supports several sequential decisions, It is adaptable by the user over time to deal with changing conditions.

It is easy to construct and use in many cases. DSS promote learning, which leads to new demands & refinement of the current

application which leads to additional learning & so forth. It usually utilizes quantity models.(Standard or custom made) Advanced DSSs are equipped with a knowledge management component that

allows the efficient and effective solution of very complex problem. It can be disseminated for use via the Web. It allows the easy execution of sensitivity analysis.

2.5 Why DSS?

Increasing complexity of decisions: Because of technologies Information are growing faster complexity of taking decision is increasing. Not only that number and complexity of options are going greater day by day, to keep pace with the rapid change DSS is important.Increasing availability of computerized support : Today, inexpensive high-powered computing devices & better software is available. So more efficient software development process can be ensured because of increasing usability of computers.

2.6 ClassificationsThere are several ways to classify DSS applications. Not every DSS fits neatly into one category, but may be a mix of two or more architectures.

Holsapple and Whinston classify DSS into the following six frameworks: Text-oriented DSS, Database-oriented DSS, Spreadsheet-oriented DSS, Solver-oriented DSS, Rule-oriented DSS, and Compound DSS.A compound DSS is the most popular classification for a DSS. It is a hybrid system that includes two or more of the five basic structures described by Holsapple and Whinston.

The support given by DSS can be separated into three distinct, interrelated categories: Personal Support, Group Support, and Organizational Support.

DSS components may be classified as:

1. Inputs: Factors, numbers, and characteristics to analyze2. User Knowledge and Expertise: Inputs requiring manual analysis by the user3. Outputs: Transformed data from which DSS "decisions" are generated4. Decisions: Results generated by the DSS based on user criteria

DSSs which perform selected cognitive decision-making functions and are based on artificial intelligence or intelligent agents technologies are called Intelligent Decision Support Systems(IDSS).

The nascent field of Decision engineering treats the decision itself as an engineered object, and applies engineering principles such as Design and Quality assurance to an explicit representation of the elements that make up a decision.

2.7 Components of DSS

Every DSS consists of at least data management, user interface, model management components, and the end users. A few also contain a knowledge management component.

DSS data management subsystem contains all the data that flow from several sources, and are extracted prior to their entry into a DSS database or a data warehouse.

Model management subsystem contains completed models (financial, statistical, management science, or other quantitative models), and the routines to develop DSSs applications.

The User interface covers all aspects of the communications between a user and the DSS.

The Users.  The person (manager, or the decision maker) faced with the problem or decision that the DSS is designed to support

knowledge-based or intelligent subsystem provides the expertise for solving some aspects of the problem, or the knowledge that can enhance the operation of the other DSS components.

2.8 DSS Process

DSS process are varies from firms to firms, problems to problems, mangers to managers. Though to support decision making DSS commonly go through some processes, illustrated in figure 2.1.

Figure2.2: Overview of a DSS process.

2.9 DSS Models and Software

Models of DSSs are designed to be ad hoc, quick-response systems that are initiated and controlled by the decision maker. DSS Software relies on model bases as well as databases. DSS might include models and analytical techniques used to express complex relationships and can combine model components to create integrated models in support of specific types of business decisions.

2.10 Data miningo Associations refer to the occurrences that are linked to a single event. Example-

Consumers buy other products because of a promotion.o Sequences refer to Events are linked over time. Example-Appliance purchase due to

purchase of a new home o Clustering works in a manner similar to classification when no groups have yet been

defined. Example- Grouping inferring new rules for these groups.o Forecasting uses existing values to forecast what other values will be. Example-What

future sales may be based on current sales..

2.11 Applications

A growing area of DSS application, concepts, principles, and techniques is in agricultural production, marketing for sustainable development. For example, the DSSAT4 package, developed through financial support of USAID during the 80's and 90's, has allowed rapid assessment of several agricultural production systems around the world to facilitate decision-making at the farm and policy levels.A specific example concerns the Canadian National Railway system, which tests its equipment on a regular basis using a decision support system. A problem faced by any railroad is worn-out or defective rails, which can result in hundreds of derailments per year. Under a DSS, CN managed to decrease the incidence of derailments at the same time other companies were experiencing an increase.DSS has many applications that have already been spoken about. However, it can be used in any field where organization is necessary. Additionally, a DSS can be designed to help make decisions on the stock market, or deciding which area or segment to market a product toward.

There are theoretical possibilities of building such systems in any knowledge domain. Such as- Clinical decision support system for medical diagnosis. a bank loan officer verifying the credit of a loan applicant an engineering firm that has bids on several projects and wants to know if they can be

competitive with their costs. DSS is extensively used in business and management. Executive dashboards and

other business performance software allow faster decision making, identification of negative trends, and better allocation of business resources.

A growing area of DSS application, concepts, principles, and techniques is in agricultural production, marketing for sustainable development.

A specific example concerns the Canadian National Railway system, which tests its equipment on a regular basis using a decision support system.

A DSS can be designed to help make decisions on the stock market, or deciding which area or segment to market a product toward.

3. Executive Support Systems (ESS)

Executive support systems (ESS) are computer-based systems that provide top managers with the capability to attain easy access to internal and external information which is relevant to strategic decision making and other executive responsibilities. The terms "executive support system" and "executive information systems" (EIS) are often used interchangeably, although executive support system typically refers to a system with a broader set of capabilities.

Executive Support Systems (ESS) helps senior manager in to take decision in issues like – strategic issues and long term trends, both in the firm & external environment. ESSs address non-routine decisions requiring judgment, evaluation & insight because there is no agreed-on procedure for arriving at a situation. Such as: What will employment level will be in five years? What are the long term industry cost trends and where does our firm fit into it? What products should we be making in five years? What new acquisitions would protect us from cyclical business swing?

ESS presents graphs & data from sources through an interface that is easy for senior manager to use. Often the information is delivered to senior managers through a portal, which is a web interface to present integrated personalized business content.

ESSs are designed to incorporate data about external event, such as new tax laws or competitors, but they also draw summarized information from internal sources like DSS. They filter compress & track critical data of greatest interest to senior managers.

3.1 History

Traditionally, executive information systems were developed as mainframe computer-based programs. The purpose was to package a company’s data and to provide sales performance or market research statistics for decision makers, such as financial officers, marketing directors, and chief executive officers, who were not necessarily well acquainted with computers. The objective was to develop computer applications that would highlight information to satisfy senior executives’ needs. Typically, an EIS provides data that would only need to support executive level decisions instead of the data for all the company.Today, the application of EIS is not only in typical corporate hierarchies, but also at personal computers on a local area network. EIS now cross computer hardware platforms

and integrate information stored on mainframes, personal computer systems, and minicomputers. As some client service companies adopt the latest enterprise information systems, employees can use their personal computers to get access to the company’s data and decide which data are relevant for their decision makings. This arrangement makes all users able to customize their access to the proper company’s data and provide relevant information to both upper and lower levels in companies

3.2 Why ESS?

The strategic impact of using executive systems software is significant : selecting and ESS among other form of information technology results in strategic advantage.

International Data Corporation, a Massachusetts-based market research firm, indicates that executive support systems are increasingly gaining in importance and are predicted to be the fastest growing segment of the overall decision support system (DSS) market. A recent study of the use of executive support systems in Fortune 500 companies conducted by the authors found that approximately one-third of the respondents (30.8 per cent) currently utilize an ESS for decision support, to aid in personal productivity, and/or communication.

Executive support systems are expected to spread even further across the Fortune 500 with one-quarter of those responding managers not currently using an ESS indicating that they were implementing or planning to implement such a system in the very near future.

The opportunity for strategic advantage through technological exploration is now available for senior executives through the use of ESS technology characterized by:

the capability to access internal and external informatin are critical to understanding assessing situations quickly

the capability to communicate and confront problems electronically; the capability to report information with a combination of graphics, tables, and

text; scheduling, agenda setting, and follow-up capabilities necessary to facilitate the

business of the organization; the capability to interface and integrate with other software; statistical and drill down capabilities; functionality for decision support, what-if analysis, and queries. ease of use,

including menu systems, touchscreen, and minimal learning time for users. Not just CEOs, ESSs are helpful for other senior managers in decision making

task.

3.3 Characteristics of ESS

Drill down Critical success Factors (CSF) Status access Analysis Exception reporting Colors and audio Navigation of information Communication

3.4 ESS Process

ESS process are varies from firms to firms, problems to problems, mangers to managers. Though to support decision making ESS commonly go through some processes, illustrated in figure3.1.

Figure. 3.1: An Overview of ESS process

3.5 The Benefits of an ESS

Flexibility. Ability to analyze, compare, highlight trends. Graphics help explore situation. Monitor performance. Timeliness, availability of data allows prompt action. More specific and selective information Easy access to key corporate intranet website resources Industry and business news Access to company data for stakeholders Less time spent on unproductive surfing

3.6 Features in ESS

Information presented in forms tailored to the preferences of the users Most stress use of graphical user interface and graphics displays May also include exception reporting and trend analysis A Web-based interface and integration of intranet and other technologies that

gives all intranet users and selected extranet users access to a variety of internal & external business applications and services

3.7 ComponentsThe components of an EIS can typically be classified as:

3.7.1 Hardware

When talking about hardware for an EIS environment, we should focus on the hardware that meet the executive’s needs. The executive must be put first and the executive’s needs must be defined before the hardware can be selected. The basic computer hardware needed for a typical EIS includes four components:

Input data-entry devices. These devices allow the executive to enter, verify, and update data immediately;

The central processing unit (CPU), which is the kernel because it controls the other computer system components;

Data storage files. The executive can use this part to save useful business information, and this part also help the executive to search historical business information easily;

Output devices, which provide a visual or permanent record for the executive to save or read. This device refers to the visual output device or printer.

In addition, with the advent of local area networks (LAN), several EIS products for networked workstations became available. These systems require less support

and less expensive computer hardware. They also increase access of the EIS information to many more users within a company.

3.7.2 Software

Choosing the appropriate software is vital to design an effective ESS. Therefore, the software components and how they integrate the data into one system are very important. The basic software needed for a typical EIS includes four components:

Text base software. The most common form of text are probably documents; Database. Heterogeneous databases residing on a range of vendor-specific and

open computer platforms help executives access both internal and external data; Graphic base. Graphics can turn volumes of text and statistics into visual

information for executives. Typical graphic types are: time series charts, scatter diagrams, maps, motion graphics, sequence charts, and comparison-oriented graphs (i.e., bar charts);

Model base. The EIS models contain routine and special statistical, financial, and other quantitative analysis.

Perhaps a more difficult problem for executives is choosing from a range of highly technical software packages. Ease of use, responsiveness to executives' requests, and price are all reasonable considerations. Further, it should be considered whether the package can run on existing hardware.

Major Commercial EIS Software Vendors- Comshare Inc. (www.comshare.com) - Pilot Software Inc. (www.pilotsw.com)

Application Development Tools- In-house components - Comshare Commander tools- Pilot Software’s Command Center Plus and Pilot Decision Support Suite

3.7.3 User Interface

An EIS needs to be efficient to retrieve relevant data for decision makers, so the user interface is very important. Several types of interfaces can be available to the EIS structure, such as scheduled reports, questions/answers, menu driven, command language, natural language, and input/output. It is crucial that the interface must fit the decision maker’s decision-making style. If the executive is not comfortable with the information questions/answers style, the EIS will not be fully utilized. The ideal interface for an EIS would be simple to use and highly flexible, providing consistent performance, reflecting the executive’s world, and containing help information.TelecommunicationAs decentralizing is becoming the current trend in companies, telecommunications will play a pivotal role in networked information systems. Transmitting data from one place to another has become crucial for establishing a reliable network. In addition, telecommunications within an EIS can accelerate the need for access to distributed data.

3.7.4 ESS can be enhanced with:

Multidimensional analysis and presentation Friendly data access User-friendly graphical interface Imaging capabilities Intranet access E-mail Internet access Modeling

3.8 Developing ESS

Ease of use Facility for environmental scanning External and internal sources of information to be used for environmental

scanning Developers must build a prototype that will work at the time it is tested by the user

Executives must be able to learn the new system at a rapid pace. If the prototype does not perform the way the executive wants, it will be rejected. The system must be able to have access to scan the internal and external

environment to spot weaknesses and opportunities.

3.9 ESS for business intelligence

o Identifies changing market conditionso Formulates responseso Tracks implementation effortso Learns from feedbacko Monitoring corporate performance: o balanced scorecard systemso Model for analyzing firm performanceo Supplements traditional financial measures with measurements from additional

business perspectives

3.10 Disadvantages of EIS

System dependent Limited functionality, by design Information overload for some managers Benefits hard to quantify High implementation costs System may become slow, large, and hard to manage Need good internal processes for data management

May lead to less reliable and less secure data

4. Conclusion

The aim of this paper was to Describe, two major types of information systems- Decision Support Systems (DSS) & Executive Support Systems (ESS). The history, the attributes, the benefits & uses, disadvantages of both ESS & DSS along their components and development has been discussed Information Systems is now taking the managing task of firm because of rapidly growing technologies.. Now it becomes a trend for prosperous digitalized firms to use different Information Systems at different managerial level. This trend allows executives of a certain level escaping from learning different computer operating systems and substantially decreases the implementation costs for companies. Because utilizing existing software applications lies in this trend, executives will also eliminate the need to learn a new or special language for the IS packages. Decision Support Systems (DSS) & Executive Support Systems (ESS) both sequentially or complementarily uses in firms determined by the need.

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