Executive information system
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An Executive Information System (EIS) is a computer-based system intended to facilitate and support the information and decision making needs of senior executives by providing easy access to both internal and external information relevant to meeting the strategic goals of the organization. It is commonly considered as a specialized form of Decision Support System (DSS).
The emphasis of EIS is on graphical displays and easy-to-use user interfaces. They offer strong reporting and drill-down capabilities. In general, EIS are enterprise-wide DSS that help top-level executives analyze, compare, and highlight trends in important variables so that they can monitor performance and identify opportunities and problems. EIS and data warehousing technologies are converging in the marketplace.
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History of EIS
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, as such financial officers, marketing directors, and chief executive officers, who were not well acquainted with computers. The objective was to develop computer applications that would highlight information to satisfy senior executives’ needs. Typically, an EIS provides the 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 used in typical corporation hierarchies, but also installed at the personal computer levels or workstation levels 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 now 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 capable to customize their access to the proper company’s data and provide relevant information to both upper and lower levels in companies
EIS Components
The components of an EIS can typically be classified into the following categories:
Hardware
When talking about hardware for an EIS environment, we should focus on the hardware that meet executive’s needs. The executive must be put the 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: (1) Input data-entry devices. These devices allow the executive to enter, verify, and update data immediately; (2) The central processing unit (CPU), which is the kernel because it controls the other computer system components; (3) 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; (4) 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.
Software
Choosing the appropriate software is vital to design an effective EIS. 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: (1) Text base software. The most common form of text is probably the word processing document; (2) Database. Heterogeneous databases residing on a range of vendor-specific and open computer platforms helps executives access to both company internal and external data; (3) 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); (4) Model base. The EIS models contain routine and special statistical, financial, and other quantitative analysis. Now perhaps the more difficult problem to those executives is how to choose EIS software rather than how to use them, because the latest EIS software packages are more intelligible to nontechnicians, self-documenting, and more flexible. Therefore, when we evaluate EIS software, we should think about if the package is easy to use, if the package responds readily to the executive’s requests, and if the package is reasonably priced. Furthermore, we need consider if the package can run on the current hardware we have.
Interface
An EIS needs to be efficient to retrieve relevant data for decision makers, so the 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 and error messages.
Telecommunication
As decentralizing 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.
EIS Applications
EIS enables executives to find those data according to user-defined criteria and promote information-based insight and understanding. Unlike a traditional management information system presentation, EIS can distinguish between vital and seldom-used data, and track different key critical activities for executives, both which are helpful in evaluate if the company is meeting its corporate objectives. After realizing its advantages, people have applied EIS in many areas, especially, in manufacturing, marketing, and finance areas.
Manufacturing
Basically, manufacturing is the transformation of raw materials into finished goods for sale, or intermediate processes involving the production or finishing of semi-manufactures. It is a large branch of industry and of secondary production. Manufacturing operational control focuses on day-to-day operations, and the central idea of this process is effectiveness and efficiency. To produce meaningful managerial and operational information for controlling manufacturing operations, the executive has to make changes in the decision processes. EIS provides the evaluation of vendors and buyers, the evaluation of purchased materials and parts, and analysis of critical purchasing areas. Therefore, the executive can oversee and review purchasing operations effectively with EIS. In addition, because production planning and control depends heavily on the plant’s data base and its communications with all manufacturing work centers, EIS also provides an approach to improve production planning and control. Following are some real-world EIS applications related to manufacturing.
Marketing
In an organization, marketing executives’ role is to create the future. Their main duty is managing available marketing resources to create a more effective future. For this, they need make judgment s about risk and uncertainty of a project and its impact on company in short term and long term. To assist marketing executives in making effective marketing decisions, an EIS can be applied. EIS provides an approach to sales forecasting, which can allow the market executive to compare sales forecast with past sales. EIS also offers an approach to product price, which is found in venture analysis. The market executive can evaluate pricing as related to competition along with the relationship of product quality with price charged. In summary, EIS software package enables marketing executives to manipulate the data by looking for trends, performing audits of the sales data, and calculating totals, averages, changes, variances, or ratios. All of these sales analysis functions help marketing executives to make final decisions. Following are some real-world EIS applications related to marketing.
Financial
A financial analysis is one of most important steps to companies today. The executive needs to use financial ratios and cash flow analysis to estimate the trends and make capital investment decisions. An EIS is a responsibility-oriented approach that integrated planning or budgeting with control of performance reporting, and it can be extremely helpful to finance executives. Basically, EIS focuses on accountability of financial performance and it recognizes the importance of cost standards and flexible budgeting in developing the quality of information provided for all executive levels. EIS enables executives to focus more on the long-term basis of current year and beyond, which means that the executive not only can manage a sufficient flow to maintain current operations but also can figure out how to expand operations that are contemplated over the coming years. Also, the combination of EIS and EDI environment can help cash managers to review the company’s financial structure so that the best method of financing for a accepted capital project can be concluded. In addition, the EIS is a good tool to help the executive to review financial ratios, highlight financial trends and analyze a company’s performance and its competitors. Following are some real-world EIS applications related to finance.
Advantages and Disadvantages of EIS
Advantages
- Easy for upper-level executives to use, extensive computer experience is not required in operations
- Provides timely delivery of company summary information
- Information that is provided is better understanding
- Filters data for management
- Improves to tracking information
Disadvantage
- Functions are limited, can not perform complex calculations
- Hard to quantify benefits and to justify implementation of an EIS
- Executives may encounter overloaded information
- System may become slow, large, and hard to manage
- Difficult to keep current data
- May lead to less reliable and secure data
- Small companies may encounter excessive costs for implementation
Future Trends in EIS
The future of executive information systems will not be bound by mainframe computer systems. This trend allows executives 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 EIS package. Future executive information systems will not only provide a system that supports senior executives, but also contain the information needs for middle managers. The future executive information systems will become diverse because of integrating potential new applications and technology into the systems, such as incorporating artificial intelligence (AI) and integrating multimedia characteristics and ISDN technology into an EIS.
References
Thierauf, Robert J. Executive Information System: A Guide for Senior Management and MIS Professionals. Quorum Books, 1991
Executive information systems (January 1994). Retrieved June 17, 2006, from http://www.cs.ui.ac.id/staf/sjarif/eis.htm
