Information Systems and Their Applications – Concepts, Types & Business Use

1. What is an Information System?

An Information System (IS) is a coordinated set of components that collect, store, process, and disseminate information to support organisational goals. It is more than just a computer; it includes people, procedures, data, and technology working together.

Key Definition

Information System – “A collection of interrelated components that gather, transform, store, and deliver information to support decision‑making, coordination, control, analysis, and visualisation in an organisation.”

How an IS Works – Process Flow

flowchart LR
    A["Data Sources (transactions, sensors, users)"] --> B["Input (data capture)"]
    B --> C["Processing (validation, calculation, storage)"]
    C --> D["Output (reports, dashboards, alerts)"]
    D --> E["Feedback (user actions, system updates)"]
    E --> A

The cycle repeats continuously, ensuring that information stays current and relevant.

2. Components of an Information System

Visualising the Components

classDiagram
    class Hardware {
        +CPU
        +Memory
        +Storage
        +NetworkDevices
    }
    class Software {
        +SystemSoftware
        +ApplicationSoftware
    }
    class Data {
        +RawData
        +ProcessedData
    }
    class Procedures {
        +Policies
        +Workflows
    }
    class People {
        +EndUsers
        +ITStaff
        +Managers
    }
    Hardware --> Software : runs
    Software --> Data : processes
    Data --> Procedures : guides
    Procedures --> People : follows
    People --> Hardware : uses

Real‑World Picture

Typical server rack in a Nepali telecom data centre (Image: Sakurambo, Public domain, via Wikimedia Commons)

3. Types of Information Systems

Information systems are classified by the level of decision support they provide. The two most frequently examined types are:

Other important categories (often asked in exams):

Visual Example – TPS Workflow

flowchart TD
    A["Customer initiates payment (eSewa)"] --> B["Input validation"]
    B --> C["Transaction recorded in DB"]
    C --> D["Confirmation sent to customer"]
    D --> E["Update accounting ledger"]

4. Advantages and Disadvantages of Information Systems

5. Applications of Information Systems in Business

1. E‑Commerce Platforms – Daraz uses an integrated IS comprising inventory management, order processing, and customer relationship modules.
2. Banking & Finance – Nabil Bank’s core banking system handles account management, loan calculations, and regulatory reporting.
3. Telecommunications – Ncell’s OSS/BSS (Operations Support System/Business Support System) monitors network performance and billing.
4. Supply Chain & Logistics – Pathao’s delivery tracking system integrates GPS data, order status, and driver allocation.

Worked Example – Calculating Loan Interest (Bank IS)

A customer takes a loan of NPR 500,000 at an annual simple interest rate of 12% for 3 years.

$$\text{Interest}=P\times r\times t=500,000\times 0.12\times 3=\text{NPR }180,000$$

Total repayment = Principal + Interest = NPR 680,000.

In the bank’s IS, the loan module automatically:

1. Captures the principal, rate, and tenure.
2. Computes interest using the formula above.
3. Generates an amortisation schedule.
4. Updates the customer’s account and posts monthly instalments.

This eliminates manual calculation errors and speeds up approval.

Real‑World Picture

6. Difference Between Application Software and System Software

Real‑World Picture

Typical workstation used by a Daraz order‑processing clerk (Image: Photograph: kjarrett on Flickr, CC BY 2.0, via Wikimedia Commons)

7. Information Systems Development Life Cycle (SDLC) – Brief Overview

1. Planning – Identify need, feasibility study.
2. Analysis – Gather requirements, model processes.
3. Design – Architecture, UI/UX, database schema.
4. Implementation – Coding, hardware setup.
5. Testing – Unit, integration, user‑acceptance testing.
6. Deployment – Go‑live, training.
7. Maintenance – Bug fixes, upgrades.

SDLC Flow

flowchart LR
    P["Planning"] --> A["Analysis"]
    A --> D["Design"]
    D --> I["Implementation"]
    I --> T["Testing"]
    T --> Dp["Deployment"]
    Dp --> M["Maintenance"]
    M --> P

8. In the Real World

Real‑World Picture

9. Summary of Key Points

• An IS is a socio‑technical system that turns raw data into actionable information.
• The five core components (hardware, software, data, procedures, people) must be aligned for success.
• TPS handles day‑to‑day operations; MIS converts TPS data into managerial reports.
• Understanding the advantages/disadvantages helps evaluate IS investments.
• Real‑world Nepali examples (eSewa, Daraz, Ncell) illustrate how IS concepts drive everyday services.

Exam tip

• Definition questions: Memorise the concise definition and be ready to expand with the five components.
• Comparison tables: Practice drawing the system‑vs‑application software table; examiners love clear side‑by‑side contrasts.
• Application questions: Use the Daraz or eSewa example; describe the TPS → MIS flow and mention specific reports or outputs.
• Worked example: Re‑create the loan‑interest calculation, showing the formula and how the bank’s IS automates each step.
• Diagram marks: When drawing the IS components or SDLC, label every block and use arrows to indicate flow – even a simple mermaid diagram earns full credit.