Information systems play a crucial role in helping modern organizations manage, analyze and leverage data to operate more efficiently and make better decisions. The worldwide market for these systems is enormous – according to Market Research Future, the global information systems market is projected to reach a value of $123 billion by 2023.
With many different categories and applications of information systems, it‘s important for businesses to understand the options available to them. In this comprehensive guide, we explain 10 major types of information systems and how organizations utilize them to enhance performance.
1. Transaction Processing Systems (TPS)
Transaction processing systems are information systems that process an organization‘s basic daily transactions such as sales, purchases and payments. The key functions of a TPS include:
- Processing high volumes of routine transactions efficiently and accurately
- Updating organizational databases to record transactions
- Generating reports and summaries for managers
- Ensuring data integrity and reliability
A TPS consists of various components like data input devices (e.g. point of sale terminals, barcode scanners), application software, database storage and report generators. It can function as a standalone system or integrate with broader enterprise solutions like ERP systems.
TPS enables robust operational processing for industries like banking, retail, healthcare, manufacturing and more. For example, when you use an ATM to withdraw cash, the bank‘s TPS processes this transaction in real-time, updating your account balance and the bank‘s cash flow records instantly.
Key benefits of TPS include:
- Increased transaction accuracy and efficiency
- Faster processing compared to manual methods
- Enhanced business data integrity
- More timely and reliable reporting
2. Management Information Systems (MIS)
Management information systems are integrated systems that provide information in form of reports and dashboards to support effective decision making across departments like accounting, finance, marketing, HR and operations.
Key capabilities include:
- Data gathering from one or multiple sources
- Storing and managing organizational databases
- Analyzing large data sets and generating reports
- Visual dashboards with actionable insights
For instance, an MIS can combine inventory data from warehouses, supply chain systems and sales data from across retail outlets to generate a top-level view of stock levels and movement. It can also analyze profitability by geographical area or product line. This helps executives easily monitor performance and trends.
Benefits of MIS include:
- Improved planning using historical data analysis
- Faster and more informed decision making
- Increased productivity through automated reporting
- Better management control and strategic direction
Global MIS market size was valued at $76.3 billion in 2021. Top MIS vendors include SAP, Oracle, IBM and SAS Institute.
3. Decision Support Systems (DSS)
As the name indicates, decision support systems are information systems targeted to support organizational decision making and problem solving.
The key components of a DSS are:
Database Management System (DBMS) – Integrates data from internal systems and external sources
Model Management System – Analytics tools and models to analyze data and find trends/patterns. Includes statistical analysis, predictive modeling, optimization models etc.
User Interface – The interface that enables users to interact with the system. E.g. Dashboard or application.
For example, a retailer can input customer transaction data from across stores, competitor intelligence and economic projections into a DSS model to forecast product demand. The output can support decisions about store inventory volumes.
Benefits of DSS include:
- Informed decisions using data-driven insights
- Reduced risk and increased performance through scenario modeling
- Ability to incorporate inputs from multiple domains/disciplines
- User-friendly visual interface minimizing training needs
Top DSS tools in the market include Tableau, Qlik, Microsoft Power BI and Looker. The global DSS market was valued at $9.39 billion in 2021.
4. Executive Support Systems (ESS)
Executive support systems are information systems designed specifically to assist senior executives in finding, analyzing, interpreting and sharing relevant information for strategic decision making.
They provide quick access to timely information in easy-to-understand visual dashboards relevant to executives‘ roles. Built-in tools enable drill-down, forecasts, trend analysis and data manipulation.
For instance, the CEO of a retail firm could use an ESS to view dashboards related to overall company performance, department revenues, inventory costs, competitor analysis and more. The ESS incorporates data from company databases, syndicated data services and external benchmarks seamlessly.
Benefits of ESS include:
- Enhanced insight into metrics directly influencing strategic goals
- Ability to spot trends faster
- Improved planning agility using scenario modeling
- Tools to analyze risks vs opportunities of strategic choices
Leading ESS software vendors include SAP, Oracle, IBM and Microsoft.
5. Knowledge Management Systems (KMS)
Knowledge management systems refer to any information system designed specifically to assist in storing, sharing and applying organizational knowledge and expertise.
These could be centralized enterprise-wide systems or specialized systems built for particular organizational functions/teams which rely heavily on domain knowledge.
Key capabilities:
- A knowledge base or repository containing know-how, best practices, competitor intelligence etc.
- Collaboration tools to foster sharing between experts
- Content creation features to capture new expertise
- Semantic search to surface relevant content
Benefits include faster on-boarding of new employees, fewer errors, improved decision making and increased innovation through company-wide access to specialized know-how.
Leading KMS tools include Bloomfire, ProProfs, CallidusCloud CLM and Panviva.
The global KMS market reached $33.76 billion in 2021, indicating the growing realization that knowledge and expertise represent key competitive advantages for modern businesses.
6. Expert Systems (ES)
Expert systems, also known as knowledge-based systems or rule-based systems, are specialized information systems embedded with artificial intelligence designed to provide decisions and solutions as a human expert would.
The main components of expert systems are:
Knowledge Base – Contains domain-specific data, rules, logic and heuristics
Interface Engine – Enables users to query and interact with system
Inference Engine – Applies logic from the knowledge base to user inputs to produce expert recommendations
By codifying scarce expert knowledge in a system, it can be easily replicated across the organization without having to hire more high-cost specialists.
Expert systems are deployed in various fields like healthcare, finance, manufacturing, retail and more. For example, software like MYCIN diagnoses infections using a rule base of disease characteristics and helps recommend appropriate antibiotics.
Other top expert system shells used across industries include CLIPS, Jess, Drools and Expert Sinta.
The global expert systems market size crossed $31.48 billion in 2020.
7. Geographic Information Systems (GIS)
Geographic information systems capture, store, manipulate, analyze, manage and visualize geospatial or geographic data in form of digital maps and 3D scenes.
Key GIS capabilities:
- Integrate geospatial data from maps, satellites, GPS devices, drone imagery etc.
- Enable location analytics to study trends, patterns and relationships
- Generate interactive maps, 3D visualizations and infographics
- Incorporate with other data sources and systems
- Manage geographic metadata
GIS provides invaluable insights for use cases across government agencies and companies spanning natural resource management, infrastructure/facilities management, geo-marketing, transportation/logistics, disaster management and urban planning sectors.
For instance, GIS is used to strategize transportation of wind turbine components according to terrain conditions. It also helps organizations efficiently plan locations for new retail stores or cell towers based on demographics and local site-specific data.
The global GIS market was estimated to be $10.01 billion in 2021. Key GIS platform vendors include ESRI, Hexagon AB, Trimble and General Electric.
8. Enterprise Resource Planning Systems
Enterprise resource planning (ERP) systems integrate various business functions into a unified system environment to manage and automate operations and processes enterprise-wide.
Core functions handled include:
- Manufacturing and production planning
- Supply chain management
- Inventory control and order tracking
- Accounting, finance and expense reporting
- HR and payroll
- Sales order management and invoice generation
- CRM
Designed specifically for large, complex organizations managing global pipelines, ERP combines data across departments onto a centralized cloud platform accessible by all business units and geographies. This breaks down silos between teams and provides real-time data visibility company-wide.
Benefits include increased efficiency, improved reporting accuracy, lower operational costs and greater agility responding to business fluctuations.
The ERP applications market was estimated to be $49.5 billion in 2021. Major vendors include SAP, Oracle, Microsoft and Infor.
9. Supply Chain Management Systems (SCM)
Supply chain management systems help plan, implement, control and monitor flows of materials, information and services through delivery pipelines that supply products or services to end-customers.
Core SCM components include:
Planning & Forecasting – Demand planning, sales forecasting
Procurement – Sourcing, supplier relationship management
Inventory Control – Warehouse management, order fulfillment
Logistics Execution – Shipment routing, rate quoting, shipment tracking
Order Management – Pricing, promotions, customer delivery scheduling
Performance Management – Monitoring KPIs like cycle times, fill rates and costs
A food manufacturing company can leverage a SCM system to gain visibility into demand across retailers. This drives better coordination with ingredient suppliers upstream while optimizing production scheduling and inventory in their own facilities. SCM provides a competitive edge to react faster and more profitably.
The global supply chain management software market size was $18.84 billion in 2021. Major vendors include SAP, Oracle, JDA Software and Manhattan Associates.
10. Customer Relationship Management Systems
Customer relationship management (CRM) systems help businesses manage entire lifecycles of customer interactions including marketing, sales, customer service and support.
Key functions include:
- Centralized customer database capturing contact details, communications, purchases, feedback etc.
- Sales automation tools for opportunity management
- Customer service issue tracking and ticket workflows
- Marketing campaign management and lead generation
- Analytics on customer segmentation and satisfaction metrics
Benefits offered are:
- 360-degree customer view providing consistent experience across touchpoints
- Increased customer retention through personalization
- Faster lead conversion using targeted content
- Reduced churn by improving support
- New sales opportunities through cross-sell / up-sell
The global CRM market was valued at nearly $128 billion in 2021. Leading CRM platforms include Salesforce, SAP, Oracle and Microsoft Dynamics.
Information systems form indispensable infrastructure enabling modern digitally-driven organizations to buttress decision making and overall performance using data-based analytics and insights.
Specialized systems catering to transaction processing, management reporting, analytics, expert knowledge capture and more carry out specific functions across departments. At an enterprise level, systems like ERP, SCM and CRM weave these together into integrated ecosystems servicing cross-functional analytics and organizational coordination needs.
Investment into appropriate information systems matching organizational maturity and priorities confers competitive advantage and optimization. Their scope can multiply from basic transactional efficiencies to advanced envisioning of markets using predictive geospatial analytics and AI – ultimately powering superior performance.
Frequently Asked Questions
Q: What are the different types of information systems?
A: The 10 major types covered here are – transaction processing systems, management information systems, decision support systems, executive support systems, knowledge management systems, expert systems, geographic information systems, enterprise resource planning systems, supply chain management systems and customer relationship management systems.
Q: What is the main purpose of transaction processing systems?
A: Transaction processing systems help organizations process high volumes of routine daily transactions like sales, purchases and payments efficiently and accurately while updating databases and records.
Q: How do management information systems help businesses?
A: Management information systems generate aggregated reports using actual operating data to provide insights that support frontline to top-level planning, control and decision making across departments.
Q: What problems do decision support systems solve?
A: Decision support systems leverage data analytics and modeling to provide data-driven insights and recommendations that enhance complex decision making constrained by time, expertise or capacity.
Q: Why should senior executives invest in executive support systems?
A: They promote agility in adapting strategic direction using latest performance dashboards and trend analysis along with tools to quickly simulate market scenarios. This is invaluable for fast-response decision making.
