What is an Information System? 5 Components, Types, Advantages, Disadvantages [PDF Included]

In this digital era, we all are somehow accustomed to the word “Information System” although not well-versed with the concept or definition. If asked what is “Information System” one will definitely say the words like computer or network or database. But an information system is much more than just a computer or network. It surrounds us almost every time and is changing every day. Nowadays, life seems impossible without it. From the smartphones in our hands, the Wi-Fi networks on our college campus–to the traffic lights, sales management, and billing systems in the shopping malls, etc.–Information System is virtually in every walk of our life.


An information system is the combination of interrelated components like hardware, software, and telecommunication networks, working together to collect, create, process, store, organize and disseminate information–in order to support decision making, coordination, analysis, and control in an organizational setting. 

Thus, the above definition aims at describing an information system in two ways:

  1. The different components that makeup an information system
  2. And the roles played by these components in an organization

Components Of Information System

The information system is made up of five essential components–hardware, software, database, networking communication, and people. These five components can be grouped into two broad categories. The first three components can be grouped as “Technology” whereas the last two components are meant to “add value to organizations”.

1. Hardware

This is the physical technology that includes all physical devices and materials used in information processing. That means it includes all the tangible equipment used for input, output, and processing of data. The hardware components in a computer-based information system can be grouped into the following two categories:

(i) The components that can be seen or touched easily— such as keyboard, printer, mouse, video screen, etc.

(ii) The components that reside inside the computer or device case and can only be seen after opening the device— such as motherboard, computer chips, internal memory chips, etc.

 However, the structure of the hardware depends upon the type and size of the organization. 

2. Software

The set of instructions or programs used to control and coordinate hardware, and analyze and process data, is called software. The 

The concept of software not only includes the programs to control and coordinate the hardware but also the procedures needed by people to process information. Software is intangible and is created by programmers by typing a sequence of instructions in some programming language. It is used for organizing and delivering data to the user, managing the physical storage of media and virtual resources. The software can be divided into two major categories:

(i) Operating system software – It is the primary piece of system software that manages, controls, and supports the operations of the hardware, and simplifies programming. Eg: Microsoft Windows, iOS, Google Android 

(ii) Application software – It is the set of programs designed to perform specific tasks, such as analyzing sales, handling a spreadsheet, creating a document, or designing a web page. These programs assist end-users directly in executing their work. E.g. Microsoft Excel.

3. Data and Database

Data is a collection of raw facts or observations that constitute a valuable organizational resource. The terms data and information are often mixed up and are used interchangeably. However, there is a thin line of difference between the two. It is better to view data as unorganized raw materials that are aggregated, processed, and value-added to generate information. The generated information is then used to make decisions that can be analyzed for their effectiveness, aiding in the organization’s improvement.  

Data is composed of traditional numbers, alphabets, and other characters, audio, sounds, images, graphic shapes and figures, and so on. It is an intangible component of an information system that is not really very important by itself unless aggregated,  indexed, and organized together in a database. 

Thus, the database is nothing but software for organized collection and management of data and knowledge bases that are stored and accessed electronically. 

4. Network Communication

Communication is the fourth component that has recently been added to the group of the core technology of information systems, the first three being hardware, software, and data. The first personal computers did not usually rely on the Internet, which proves that an information system can exist without the ability to network communication. However, in the present hyper-connected world the ability to network-communicate has become a very important feature of information systems that have created an all-new category of its own. 

activities anywhere in the world at any time.

5. People

The final and probably the most essential component of an information system is people, without whom the previous four components can not function. Human resources include two types of people—

▪︎the end-users (like accountants, salespeople, customers, etc) who use the information they produce themselves for their own purpose; 

▪︎the information system specialists (like computer operators, analysts, programmers, etc.) who develop and operate information systems. 

A typical organization deals with six primary types of information systems, each with functionality that support and assists a specific organizational level. This enables the companies to ensure proper management of every facet of their data and to find scope for improvement in decision-making and problem-solving. 

Types of Information System

mation system is the combination of interrelated components like hardware, software, and telecommunication networks, working together to collect, create, process, store, organize and disseminate information–in order to support decision making, coordination, analysis, and control in an organizational setting. 

Thus, the six types of the information system are :

1. Transaction Processing System (TPS)

A transaction is a business activity or event comprising all the purchases and sales of products and services along with daily payments, deposits, withdrawals, entry, and placing of orders, shipping, etc., that are required to operate a company. A Transaction Processing System is a computerized system that collects, stores, modifies, and restores these data transactions in an enterprise. This type of information system is used by the users at the operational management level. Examples of TPS include payroll systems, stock control systems, point of sale systems, airline booking systems, and so on. 

A transaction processing system is very essential to any organization as it affects the company a lot by supporting daily routine business transactions. 

It ensures that all of the contractual, transactional, and customer relationship data is stored in a safe and accessible location. By utilizing a TPS an organization can reduce the chances of human error while gaining excellent accuracy and reliability in the use of data.

2. Management Information System (MIS)

The next important type of information system is Management Information System which retrieves, aggregates and analyses the information from TPS and generates reports to aid in planning, decision-making, control, and coordination in an organization.

The produced reports are used by tactical managers to predict, monitor, and control future performances. MIS usually involves technology in the form of hardware and software along with people and procedures.

Most of the reports generally include summaries of annual sales data, performance data, or historical records. This information provides a secure and systemized way for tactical managers to make structured decisions and judgment calls, achieve their targets, and supervise business units.

Sales management systems, budgeting systems, human resource management systems, and online reservation systems are some examples of management information systems. 

3. Decision Support System (DSS)

This system is handled by the senior or higher management of any organization for non-routine decision-making. A decision support system gathers and stores information from both internal systems, such as TPS and MIS and external systems to help management to take proper and timely actions. 

It is a very interactive system where solutions are obtained by using sophisticated mathematical models, statistical techniques like probability, modeling, etc, charts, and tables. These visual presentations help in easy understanding, comparison, and analysis of large quantities of information so that the management can easily ask important questions and include or exclude data.

Examples of DSS include financial planning systems and bank loan management systems.

4. Office Automation System (OAS)

An office automation system is a network of various tools, computers, communication technologies, and people required to conduct official tasks at the clerical and managerial levels. 

The fundamental function of an office automation system is to enhance communication among different departments in an organization so that everyone can collaborate and complete a task efficiently. Along with supporting official activities at every level the OAS also covers office transactions. 

The tasks performed by OAS include activities like printing, mailing, preparing written communication, typesetting, scheduling meetings, etc at the clerical level. OAS also includes managerial activities like creating reports, conferencing, controlling the performance of the company, and so on. 

An OAS can benefit an organization by improving communication between employees and optimizing knowledge management. The integration of OAS with applications like email, voice mail, electronic filing, and word processing ensures easy access to all communication data in one centralized location.

5. Knowledge Management System (KMS)

The KMS is a specialized system that stores and extracts information to expedite knowledge creation of the users, employees, management, and other stakeholders involved with the organization. It optimizes the collaboration efforts of the employees to complete tasks and ensures that the business’s technical skills and knowledge are correctly applied. It also uses visuals, communication, and document management tools to enhance the knowledge of the employees and help them to make sense of the data they see. Documents like employee training materials, company policies, and procedures, or answers to customer questions are found in the knowledge management system.

6. Executive Support System (ESS)

The executive support system is like a DSS but for executive-level decision-making. The decisions demand more insight and judgment as they affect the entire company.

summarizing internal data that are taken from DSS and MIS and external sources with the help of graphics software. It allows enterprise leaders to find answers to non-routine questions, track competitors, pinpoint opportunities, and forecast future trends in order to improve the company’s outlook and performance. 

Advantages and Disadvantages of Information System

What is an Information System? 5 Components, Types, Advantages, Disadvantages [PDF Included]

Everything comes with both advantages as well as disadvantages. Although information system is immensely beneficial for businesses yet it has some shortcomings also. Here’s a list of the advantages and disadvantages; 

Advantages of Information System

1) Storage and protection of information

The storing components of information systems are created to collect and store an enormous amount of data for a very long time. These stored data can be accessed by the users whenever necessary. Maintaining the security of company records is very vital to the integrity of the company. Moreover, hackers can be blocked with intense security. Even the virtual vault limits the loss or damage of electronic information during a system breakdown.

2) More efficiency and greater productivity

Most businesses are now highly dependent on information systems for more efficiency and increased productivity. The automated processes enable the completion of more work in a shorter amount of time. This allows the employees to handle a greater workload with more efficiency and accuracy and less human error. Many tasks are completed by the computer. This provides more free time and flexibility to the employees to focus on other tasks to improve the company’s efficiency as well.

3) Reduced risk of errors

As information systems employ automated processes so users can get the most accurate information needed to perform an activity. It is better to say that all the steps – from input to organizing, storing, and processing of data and finally output– are done with great accuracy. 

Potential human errors in manual processes can be minimized. 

4) Better communication

Communication is very essential to personal as well as business relationships. The success of a company depends highly on communication between supervisors and employees, as well as between employees and clients. Telecommunication in the form of video conferences, emails, fax, and so on allow easier exchanges of information and opinions. 

Disadvantages of Information System

1) Expensive

At the primary level, some technologies, hardware, tools, and means of communication require great expenses. Then the setup of the information system can also be very costly. Regular maintenance and repair of these types of equipment are also required. Updating and upgrading the devices, software, and other components associated with additional costs. Apart from the technological side, people should also be employed to operate the system and thus should be paid wages. Training of these people again requires some expenses.

2) Reduction in jobs

As tasks are completed quickly and efficiently using an information system so employees get more time. So, to operate fully companies are trying to combine jobs in order to reduce the number of employees. In some cases, machines are replacing human labor and eliminating jobs. 

3) Security breaches

Electronic information is highly prone to security breaches. Hackers are constantly updating and upgrading themselves along with the technology. So, companies should keep a security specialist employed all the time to prevent any threat to the security of their vital information. This interrupts the smooth functioning of the system, causing customer dissatisfaction and other problems for the company. 

Manual Information System VS Computerized Information System

Manual Information System

A manual information system is the age-old form of information system which does not employ any computerized or automatic devices. All the works such as recording, storing, analyzing, and retrieving data are done manually, i.e., through personnel. 

Although the manual processes are time-consuming yet this system is much cheaper as additional expensive equipment is not needed and the tasks can be done with simple objects like pen and paper. It is much more flexible compared to a computerized system. 

However, this form of information system has some serious drawbacks which have reduced its popularity and implementation, such as :

  • prone to errors
  • lack of accuracy
  • lack of security
  • data inconsistency due to duplication of data
  • lack of backups if files get lost or damaged

Computerized Information System

With the advent of technology, computerized information systems were developed to address and overcome the challenges of manual information system. Here a combination of hardware, software, database, and communication networks are used along with people and procedures to record, store, analyze and retrieve information technologies. 

However, the purchase and setup of the equipment of the computerized information systems can be quite expensive. Their maintenance, repair, and updates require additional charges. Moreover, the staff is needed to be trained to use the computer and other devices. If any part of the computerized system stop functioning then the information can not be accessed and the whole process may come to a stop till the defective part is replaced. In spite of security measures, the risk of fraud is still inescapable if proper controls and checks are not done.

Geographic Information System

A geographic information system (GIS) is a computer system that captures, manages, stores, checks, analyses, and displays geographically referenced information related to positions on earth. It usually examines different kinds of data associated with a particular location and shows them on one map, such as streets, vegetation, settlements. This assists people to see, analyzing, and understanding spatial patterns, relationships, and geographic context more easily. 

GIS provides a substructure for mapping and analysis. Viewing and analyzing data on maps help us in making better decisions. That is why GIS is being used extensively in science and almost every industry around the world to make maps that communicate, analyze, share information and solve complex problems. 

GIS consists of hardware, software, and database that may include cartographic data, photographic data, digital data, or data in spreadsheets or tables. 

Although an emerging technology itself, geographic information systems are constantly evolving yet its ultimate goal is to provide actionable intelligence from all types of data. The major applications of GIS are found in:

  • Detecting new store locations
  • Reporting power outages 
  • Forecasting and predicting weather
  • Routing in-car navigations

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