Types of Systems in Information Systems and Management

In management and information systems, the concept of a system plays a foundational role. Organizations rely on well-designed systems to coordinate activities, process information, and achieve strategic objectives efficiently. Understanding the types of systems, their components, and their role in planning helps managers design better processes and make informed decisions.

7.1 What Is a System?

A system is a set of interrelated and integrated elements that work together with a common purpose to achieve a specific objective. These elements interact in an organized manner so that the output of the system contributes to desired goals.

In business and information technology, systems are designed to transform inputs into meaningful outputs through defined processes.

Example: A Purchase and Sales System integrates customer orders, inventory data, billing, and reporting to ensure smooth commercial operations.

7.2 Components of a System

Every system, regardless of its complexity, consists of a set of core components. The effectiveness of a system depends on how well these components are designed and coordinated.

• Input Elements: Raw data or resources entered into the system, such as transactions, materials, or signals.
• Process: Activities such as computation, analysis, transformation, or application of models that convert inputs into outputs.
• Output Elements: Results produced by the system, including reports, products, services, or decisions.
• Control Mechanism: Methods for comparing actual performance with expected or standard performance.
• Feedback System: Information returned to the system to enable corrective actions and improvements.
• Objectives: The expected or ideal outcomes the system is designed to achieve.

7.3 Types of Systems

Systems can be classified in several ways based on how they operate and interact with their environment. The most common classifications include open-loop, closed-loop, open systems, and closed systems.

7.3.1 Open-Loop System

An open-loop system is one in which the output is not used for control purposes. In such systems, there is no feedback mechanism to compare actual output with desired objectives.

• The output is not linked back to the input for measurement or correction.
• Control and feedback mechanisms are absent.
• Internally defined objectives may not exist.

An open-loop system typically consists of only:

• Input
• Process
• Output

Example: An information system that automatically generates periodic reports without using those reports to monitor activities or adjust inputs.

7.3.2 Closed-Loop System

A closed-loop system uses feedback to control its operations. Part of the output is fed back into the system to influence future inputs or processing activities.

• Output is continuously compared with predefined objectives.
• Corrective actions are taken when deviations are detected.
• Ensures better accuracy, stability, and performance.

Key characteristics of a closed-loop system include:

• Control Mechanism
• Feedback System
• Clearly defined Objectives

Example: A budgetary control system in which actual financial results are compared with budgeted figures, and corrective actions are taken when variances occur.

7.3.3 Open Systems

An open system is one that interacts continuously with its external environment. It exchanges resources, information, and energy with external entities.

• The environment influences the system.
• The system, in turn, influences the environment.

Open systems are adaptive and flexible, making them suitable for dynamic and competitive environments.

Examples:

• A business organization influenced by customers, suppliers, competitors, and government policies.
• A computerized manufacturing system affected by market demand and societal expectations.

7.3.4 Closed Systems

A closed system does not interact with its environment. It operates independently without external influence or output disclosure.

• No exchange of information or resources with the environment.
• Highly controlled and restricted in nature.

Examples:

• An information system used in a research laboratory to control experimental data.
• A secure information system designed to store highly sensitive data with no external access.

Objective of Having Systems

Organizations design systems to ensure the effective and efficient use of resources. The primary objectives of having systems include:

• Processing predefined inputs using standardized instructions.
• Producing consistent, high-quality outputs.
• Ensuring optimal utilization of tangible and intangible resources.
• Supporting managerial control and decision making.

7.4 Levels of Planning

Planning in organizations is typically carried out at three distinct levels, each serving a different purpose.

• Strategic Planning
• Tactical / Functional Planning
• Operational Planning

Strategic Planning

Strategic planning involves the formulation, evaluation, and selection of long-term strategies to achieve organizational objectives. It is primarily the responsibility of top management and focuses on the future direction of the organization.

Tactical / Functional Planning

Tactical planning ensures that resources are obtained and used efficiently to achieve strategic goals. Departmental managers translate strategic plans into actionable programs within their functional areas.

Operational Planning

Operational planning focuses on day-to-day activities. It ensures that specific tasks are performed efficiently and effectively according to established procedures.

Functional Strategic Planning

Strategic planning at the functional level requires executive commitment across key areas such as:

• Manufacturing Resources
• Financial Resources
• Human Resources
• Marketing Resources
• Information Resources

7.5 Strategic Planning for Information Resources (SPIR)

Strategic Planning for Information Resources (SPIR) ensures that information systems strategy is aligned with business strategy. Both strategies must be developed concurrently to avoid misalignment and wasted investment.

Information technology investments are often costly and inflexible. Therefore, IT strategies must directly support business objectives and enhance competitive advantage. Any deviation between business strategy and IT strategy should be identified and corrected early.

Example:

• Business Strategy: Improve order fulfillment speed by relocating inventory systems closer to warehouses.
• Information Systems Strategy: Identify and deploy the information resources required to support real-time inventory tracking and efficient shelf picking.

Information Value Chain

The information value chain describes how raw data is transformed into valuable information through multiple stages of processing. At each stage, value is added by improving accuracy, relevance, timeliness, or usability.

For example, when a customer order is received, data is entered into a computerized system. This data then updates order lists, customer records, and inventory files. Once the order is fulfilled, the information is stored for future analysis and decision making.

In many analytical and simulation-based systems, even simple tools—such as generating random values for testing models or forecasting scenarios—can support decision making. For instance, managers and students may use an online random number generator to simulate demand patterns, test system behavior, or validate analytical models during system design.

By understanding systems, their types, and their role in planning, organizations can design more resilient, adaptive, and value-driven information systems that support both operational efficiency and strategic decision making.