SECTION 2: CONTENTS .........................................................................................................................

2
CHAPTER 1: INTRODUCTION TO COMPUTER HARDWARE AND SOFTWARE............................. 2
PART 1: COMPUTER HARDWARE ........................................................................................................ 2
Learning Objectives .............................................................................................................................. 2
Overview of the e-Learning Material ................................................................................................... 2
1.1 Introduction ..................................................................................................................................... 3
1.2 Overview of components of IS Infrastructure/ IS layers ............................................................... 3
1.2.1 People -Users ..................................................................................................................... 4
1.2.2 Application Software .......................................................................................................... 4
1.2.3 Database Management Systems (DBMS) ........................................................................ 5
1.2.4 System Software -Operating Systems .............................................................................. 5
1.2.5 Network ............................................................................................................................... 5
1.2.6 Hardware ............................................................................................................................ 6
1.3 Components of a Computer........................................................................................................... 6
1.3.1 Computer Peripherals ........................................................................................................ 7
1.3.2 What is inside the Computer? ........................................................................................... 8
1.3.3 Memory ............................................................................................................................... 9
1.4 Data representation in Memory- Bits and Bytes .........................................................................12
Data storage media........................................................................................................................13
1.5 Hardware Asset Management .....................................................................................................13
1.5.1 Hardware Acquisition .......................................................................................................14
1.5.2 Hardware Maintenance Program ....................................................................................16
1.5.3 Hardware Monitoring Procedures....................................................................................16
1.5.4 Data and Capacity Management .....................................................................................17
1.5.5 Hardware Retirement .......................................................................................................18
1.6 Auditing Hardware ........................................................................................................................19
1.7 Summary.......................................................................................................................................20
1.8 References ...................................................................................................................................21
 Chapter 1, Part 1: Computer Hardware

SECTION 2: CONTENTS
CHAPTER 1: INTRODUCTION TO COMPUTER
HARDWARE AND SOFTWARE
PART 1: COMPUTER HARDWARE

Learning Objectives
 To gain understanding of components of Information Systems (IS) Infrastructure
 To understand working of computer and peripheral devices
 To understand Data Representation in memory and storage
 To gain understanding of Hardware Asset Management
 To understand Auditing Hardware

Overview of the e-Learning Material

Module 1 of updated ISA course 2 has two parts: eLearning of 12 hours and facilitated eLearning of
6 hours. This reference material covering chapters 1 to 3 is an aid to understanding the eLearning
presentations. CAs who take up the ISA course may already have understanding of IT. However, the
level of understanding may vary. The objective of the material is to cover all the fundamental concepts.
Hence, CAs who already have good understanding of these concepts may do a quick review of the
reading material and then take up the eLearning module directly. It is important for DISAs to read this
reference material before taking up the eLearning as this complements and provides a more detailed
coverage of eLearning topics. This material has been prepared as a reference guide to the eLearning
and follows the same presentation style and structure of the presentations covered in the eLearning.
This material is not written in the style of text book material but is written in simple style to
enable quick and easy understanding. The primary purpose of the material is to be
supplementary reading material for the eLearning presentation. Hence, the content closely
follows the presentations and is provided as bullet points and further explained as required.
Further, the focus is on windows environment as it is most prevalent.

DISAs are advised to refer this material before eLearning and also after completing the eLearning
presentations to get more clarity on the topics discussed. However, this material is not expected to

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Module 1: e-Learning

be comprehensive but is prepared as a starting point for understanding IT. Readers are advised to
refer to the references provided here to get clarifications on specific areas as required. IT is a dynamic
field and is continuously evolving. The material covers IT environment prevalent and relevant at the
time of its preparation. However, it is expected to be updated on regular basis. Please visit the CIT
portal of ICAI (http://cit.icai.org) for the latest updated material.

1.1 Introduction
We cannot think of any enterprise today without Information systems and the critical infrastructure for
developing and maintaining Information Systems is provided by Information Technology (IT). IT is a
key enabler for increasing operational excellence, customer and supplier relations, better decision
making and competitive advantage. In short, IT is required not only to thrive but to survive in the
modern IT age. When IT is integrated with organisation and management, it can provide better ways
of conducting business that empower organisations with a strategic advantage.

Business today is growing exponentially and this growth of business is propelled by information. The
more information a business acquires, the more difficult it becomes to make decisions. In the past,
people could rely on manual processes to make decisions because they had limited amount of
information to process. Today, with massive volumes of available information, it is almost impossible
for management to take decisions without the aid of information systems. Highly complex decisions
must be made in increasingly shorter time frames. All this and more has made adoption of IT an
imperative for running any enterprise.

1.2 Overview of components of IS Infrastructure/ IS layers

Any information system will have interaction amongst Hardware, System Software, Application
Software, Database Management systems (DBMS), Network links and People. These are the key
components of IT Infrastructure in Information system. The components of IS Infrastructure are given
here:

In deploying IT, management has to determine what types of hardware and software will satisfy their
current and future business needs, the right time to buy the equipment, and how to protect their IT
investments. Auditors also have to understand how the management has deployed IT for their
business and whether it helps them meet their business objectives. This does not imply that auditors
need to be experts in all areas of technology; however, a working knowledge of IT hardware and
software in terms of features and functionalities can help auditors to review and evaluate whether IT
is meeting business needs and is implemented with right level of security at optimum cost. In the
following sections we will understand these various layers of IS. A good understanding of how
technology works and how this can be deployed in organisations to meet business objectives will

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enable auditors to offer new IT enabled services. List of sample services which can be provided by a
CA in the IT areas are covered in the second part of this module (overview of eLearning and IT
Enabled services).

PEOPLE (USERS)

APPLICATIONS

DBMS

SYSTEM SOFTWARE

NETWORK

HARDWARE

Components of IS Infrastructure

1.2.1 People -Users

People are the most important element in most computer-based information systems. The people
involved include users of the system and information systems personnel, including all the people who
manage, run, program, and maintain the systems.

1.2.2 Application Software

Application software is the software that causes a computer to perform useful tasks beyond the
running of the computer itself. It is a collection of programs which address a real life problem,
business, scientific or any other, for its end users. The various types of application software are:

 Application Suite: e.g. MS Office 2013 etc.

 Enterprise Software: e.g. ERP Applications like SAP, etc.
 Enterprise Infrastructure Software: e.g. email servers, Security software.
 Information Worker Software: e.g. CAAT (Computer assisted audit tools), etc.
 Content Access Software: e.g. Media Players etc.
 Educational Software: e.g. eLearning, Examination Test CDs
 Media Development Software: e.g. Desktop Publishing, Video Editing etc.

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1.2.3 Database Management Systems (DBMS)

 Every organisation has to manage its information.
 DBMS are software that aid in organizing, controlling and using the data needed by the
application programs. They provide the facility to create and maintain a well-organized
database. Applications access the DBMS, which then accesses the data. Commercially
available Data Base Management Systems are Oracle, MySQL, SQL Servers, MS Access
and DB2 etc.
 Data bases are being used at Front end (A front end to a database usually refers to the user
interface that is working with that database). A back end database is the database "behind"
an application. Most of web based applications would be having some or the other database
at back end.
 We are these days in learning revolution and Databases provide life blood to information
economy.
1.2.4 System Software -Operating Systems
System software is computer software that is designed to operate the computer hardware and to
provide and maintain a platform for running application software. One of the most important and widely
used system software is computer operating systems like Windows, UNIX and Linux.

System Software coordinates instructions between applications and hardware

 Enables computer to work

 Controls computer’s working
 Enables connecting I/O devices
 Includes:
o Operating system
o Utility programs
1.2.5 Network
 In today’s high speed world, we cannot imagine an information system without an effective
communication system. Effective and efficient communication is a valuable resource which
helps in good management. To enable this communication, we need communication
networks.
 Computer Network is a collection of computers and other hardware interconnected by
communication channels that allow sharing of resources and information. Where at least one
process in one device is able to send/receive data to/from at least one process residing in a
remote device, then the two devices are said to be in a network. Physically it would be
devices which are connected but logically it would be a process in one device transmitting

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data to another process in another device. A network is a group of devices connected to

each other.
1.2.6 Hardware
 Hardware is the tangible portion of our computer systems, something we can touch and see
and it consists of devices that perform the functions of input, processing, data storage and
output activities of the computer.
 The keyboard, monitor, CPU, HDD (Hard Disk drive) etc. are all hardware components of a
computer.

1.3 Components of a Computer

Hardware is the tangible portion of our computer systems, something we can touch and see and
consist of devices that perform the functions of input, processing, data storage and output activities
of the computer.

Control Arithmetic
Unit Logic Unit

ALU Output
Input
Devices
Devices
Memory
Registers Cache

Primary Memory

Secondary Memory

Functional Diagram of CPU

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1.3.1 Computer Peripherals

Input devices are peripheral devices which are used to interact with the computer systems and
include devices such as:

 Keyboard (helps us with text based input)

 Mouse and other pointing devices (helps us in position based input)
 Scanners and webcams (helps us in image based input)
 Bar Code, MICR readers (helps us in automatic input)
 Microphone (helps us in voice based input)
 Stylus/ Touch Screen (helps us in touch based input)
Output devices are devices through which system responds.

Computers systems provide output to decision makers at all levels in an organisation to solve
business problems, the desired output may be in visual, audio or digital forms.

Visual output devices like, a display device visually conveys text, graphics, and video information.

 Cathode-ray tube (CRT)

A vacuum tube that uses an electron gun (cathode) to emit a beam of electrons that
illuminates phosphors on a screen as the beam sweeps across the screen repeatedly. A
monitor is often called a CRT.

 Liquid crystal display (LCDs)

A low-powered display technology used in laptop computers where rod-shaped crystal
molecules change their orientation when an electrical current flows through them.

 Laser printer
A printer that forms images using an electrostatic process, the same way a photocopier
works.

 Ink-jet Printer
A printer that makes images by forcing ink droplets through nozzles.

 Plotter
A printer that uses computer-directed pens for creating high-quality images, blueprints,
schematics, etc.

 Speaker
Gives an audio output

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Processing devices include computer chips that contain the central processing unit and main
memory. Processing caters to the desire of users and displays results. It consists of CPU and Main
Memory.

Storage Devices are available in huge sizes. Programs and data can be stored on storage devices.

Secondary storage differs from primary storage in that it is not directly accessible by the CPU.
Examples of secondary storage are,

 Hard drive
 Flash drive
 CD-ROM drive (mostly outdated) or DVD-ROM drive
1.3.2 What is inside the Computer?

Central Processing Unit (CPU)

The central processing unit (CPU) (or microprocessor) is the actual hardware that interprets and
executes the program (software) instructions and coordinates how all the other hardware devices
work together. The CPU is built on a small flake of silicon and can contain the equivalent of several
million transistors. We can think of transistors as electronic switches that allow a current to pass
through i.e. “on” or “off “i.e. taking a value of 1 or 0.

The processor or Central processing Unit (CPU) is the brain of the computer. The main function of
CPU is to execute programs stored in memory. It consists of three functional units:

1. Control Unit (CU)

Fetches Program from the memory and determines their type
o Controls the flow of data and instruction to and from memory
o Interprets the instructions
o It simply controls which ones to execute and when

2. Arithmetic and Logical Unit

Performs Mathematical and Logical operations
o Performs arithmetic operations such as addition, subtraction, multiplication, logical
comparison of numbers equal to, greater than, less than, etc.

3. Registers
Small High Speed Memories that store temporary results
o High-speed memory units within CPU for storing small amount of data(Mostly 32 or
64 Bits)
o Registers could be
 Accumulators: they can keep running totals of arithmetic values.

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 Address Registers: they can store memory addresses which tell the CPU
where in memory an instruction is located.
 Storage Registers: they can temporarily store data that is being sent to
or coming from the system memory.
 Miscellaneous: general purpose used for several functions

Bus Lines
The CPU is connected through Bus lines with main memory and I/O Devices. The computer buses of
one form or another move data between all of these devices. The basic job of Bus is to move data
from one location to other within the computer.

Instructions within processor

The CPU -- the centrepiece of the computer’s architecture -- is in charge of executing the instructions
of the currently loaded program. These instructions tell the CPU to carry out various calculations, to
read and write values from and into the memory, and to conditionally jump to execute other
instructions in the program.

Machine Cycle: is the steps performed by the CPU for executing an instruction. The steps are Fetch-
Decode-Execute and store which gets executed within CPU.

Fetch Decode

Store Execute

These phases, fetch and decode are done by CU or Control Unit whose job is explaining to ALU or
Arithmetic Logic Unit whose job is to execute and the results are stored in Register

1.3.3 Memory

Virtual
Memory -
Register Cache Primary ------------
Secondary
Memory

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Memory Hierarchy

Memory is where data and programs are stored. Various types of memory devices are

Internal memory
Registers are internal memory within CPU, very fast and very small

Primary Memory
These are devices in which any location can be accessed in any order (in contrast with sequential
order). These are of primarily two types:

 Random access memory (RAM)

It is a Read write memory.

Information can be read as well as modified.

Volatile in nature, means Information is lost as soon as power is turned off.

 Read Only Memory (ROM)

It is a Non Volatile in nature (Contents remain even in the absence of power).Usually
these are used to store small amount of information for quick reference by CPU.
Information can be read not modified.

ROM is generally used by manufacturers to store data and programs.

 PROM (Programmable Read only memory) Non-volatile, Desired data and program
must first be programmed e.g. used by video game manufacturers for game instructions.
 EPROM(Erasable Programmable Read only memory)-can be erased using UV light and
reprogrammed e.g. used in Industrial Robots by car Manufacturers, can be changed
with change of car model
 EEPROMS( Electrically Erasable Programmable Read only memory)-where chip is
erasable electrically by using higher electric current e.g. used in pen drives

Cache Memory
There is a huge speed difference between Registers and Primary Memory, to bridge these speed
differences we have cache memory. Cache (Pronounced kăsh) is a smaller, faster memory which
stores copies of the data from the most frequently used main memory locations and
processor/registers can access it more rapidly than main memory.

Cache memory is something like, we record frequently used telephone numbers in our mobile
which we can access quickly otherwise we have to go to telephone directory which takes a longer

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time. Cache memory works on the same principle frequently used data is stored in easily
accessible cache memory instead of slower memory like RAM. Because, there is less data in
cache, processor can access it more quickly. There are two types of Cache memory

 Level 1 (L1) cache which is available in CPU

 Level 2 (L2) cache which is available on mother board of most systems
Now with multi-core chips, Level 3 (L3) cache has also been introduced.

Virtual Memory
Virtual Memory is in fact not a separate device but an imaginary memory area supported by some
operating systems (for example, Windows) in conjunction with the hardware. If a computer lacks
the random access memory (RAM) needed to run a program or operation, the OS uses a
predefined space on hard disk as an extension of RAM. Virtual memory combines computer’s
RAM with temporary space on the hard disk. When RAM runs low, virtual memory moves data
from RAM to a space called a paging file or swap file. Moving data to and from the paging file
frees up RAM to complete its work.

Thus, Virtual memory is an allocation of hard disk space to help RAM. With virtual memory, the
computer can look for areas of RAM that have not been used recently and copy them onto the
hard disk. This frees up space in RAM to load the new applications. Area of the space on hard
disk which acts as an extension to RAM is called a page file or swap file. In some operating
systems an entire disk or partition can be devoted to virtual memory.

Secondary Memory
CPU refers to the main memory for execution of programs, but these main memories are volatile
in nature and hence cannot be used to store data on a permanent basis. Moreover, they are very
small in sizes. The secondary memories are available in huge sizes. Thus programs and data
can be stored on secondary memories.

Secondary storage differs from primary storage in that it is not directly accessible by the CPU.
The computer usually uses its input/output channels to access secondary storage and transfers
the desired data using intermediate area in primary storage. Secondary storage does not lose
the data when the device is powered down—it is non-volatile.

The features of secondary memory devices are

 Non-volatility: Contents are permanent in nature

 Greater capacity: These are available in large size
 Greater economy: The cost per unit information of these is lesser compared to RAM.
 Slow: Slower in speed compared to registers or primary storage
Storage devices could differ amongst each other in terms of:

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 Chapter 1, Part 1: Computer Hardware

 Speed and access time

 Cost / Portability
 Capacity
 Type of access
Based on these parameters most common forms of secondary storage are:

 Hard Drive
 DAT Tapes
 Pen Drives
 CD, DVD and Blue ray Disks
 Smart card
The kind of storage we need would depend on our information system objectives.

1.4 Data representation in Memory- Bits and Bytes

The computer has switches to represent data and switches have only two states: ON and OFF. Binary
has two digits to do the counting: 0 and 1 - a natural fit to the two states of a switch (0 = OFF, 1 =
ON). Everything (instructions, numeric and character data) in memory is stored in binary form. How it
is interpreted is determined by the data or instruction format.

 This Binary Digit has been abbreviated to Bit. And a combination of 8 bits is called a Byte.
 Some other Binary Units are:
o Kilobyte (KB) = 1024 bytes,
o Megabyte(MB) =1024 KB
o Gigabyte (GB) =1024 MB
o Terabyte (TB) =1024 GB
ROM and RAM are composed of electronic components that can be in one of two states "on" and
"off". So the memory chips are divided into small compartments containing bits, each bit is either "on"
or "off” i.e. a 0 or 1.

Memory consists of consecutive bytes it can be more considered like a spreadsheet format. We have
columns and rows. They are 8 bits across and could be millions of rows long depending on how much
memory we have. The CPU tells the memory controller what column and row it wants for data and
the Memory Controller can find it in RAM

Character encoding

To represent numeric, alphabetic, and special characters in a computer's internal storage and on
magnetic media, a coding system has to be used. With 8 bits there are 28 or 256 possible combinations
of "on" or "off" in a byte.

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 ASCII (American Standard Code for Information Interchange) is essentially a 7-bit code
which allows the 8th most significant bit (MSB) to be used for error checking.
 ANSI (American National Standard Institute) Character set was used by windows. ANSI
is a modified ASCII
 UNICODE has replaced all major coding schemes and used 16 bits for character encoding.
Data storage media

Semiconductor
Semiconductor memory uses semiconductor-based integrated circuits to store information, could be
volatile or non-volatile. Primary storage like RAM is volatile semiconductor memory. Secondary
memory like Flash memory (Pen drives) and now flash-based solid-state drives (SSDs) are Non-
Volatile semiconductor memories. Data is represented with switches.

Magnetic
Magnetic storage uses different microscopic magnets of different polarities to store information.
Magnetic storage is non-volatile. Hard Disks, Tape Drives provide Magnetic Storage. In Magnetic
Storage, data (0 or 1) is represented with polarity of Magnetic field.

Optical storage
Optical storage stores information by creating microscopic pits on the surface of a circular disc and
reads this information by illuminating the surface with a laser diode and observing the reflection.
Optical disc storage is non-volatile CDs, DVDs and Blue-ray all use optical means to store Data.

1.5 Hardware Asset Management

Information systems acquisition, development, and maintenance should be considered in the context
of the organisation’s IT long- and short-range plans. COBIT* (Control Objectives for Information and
Related Technology) framework provides best practices for hardware policy areas for IT functions.
Some key factors to consider are:

 Acquisition: How is hardware acquired from outside vendors?

 Standards: What are the hardware compatibility standards?
 Performance: How computing capabilities should be tested?
 Configuration: Where client/servers, personal computers, and others are be used?
 Capacity Monitoring: Is capacity monitored for efficient operations?
 Service providers: Should third-party service providers be used?

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* COBIT is a business framework created by ISACA (Information System and Control Association) for
the governance and management of enterprise Information Technology. ISACA provides globally
accepted principles, practices, analytical tools and models to help increase the trust in, and value
from, information systems.) COBIT is available as a free download at www.isaca.org.

1.5.1 Hardware Acquisition

Acquisition of Hardware might be necessitated due to: initial deployment or expansion of existing
capacities or in response to demands of a new Application like ERP or could even be a replacement
for retired computer systems. Hardware acquisition is not only limited to computers but also to all
equipment and peripherals associated with the entire computer system, such as printers, scanners,
modems, routers, and DVD-ROMs. Before providing specifications on what is needed to vendors in
the form of an Invitation to Tender (ITT), it is essential to prepare a checklist based on the following
evaluation criteria.

Evaluation Criteria
 Compatibility and Industry Standards
o Is the hardware to be procured compatible with the existing one and does it take
care of future applications?
o Have the workload and performance requirements been calculated and is the
hardware suggested capable of fulfilling them?
o Are there any industry standards for the same, and do the hardware components
comply with them?
 Ease of Operations
o Can the hardware be installed and maintained by locally available engineers?
o Can the hardware be serviced, maintained, and upgraded locally?
o Does the hardware need any special training for its operation or will the users be
able to access/use it with minimal additional technological competence?

 Support
o What type of technical support will be provided by the vendor?
o Are appropriate manuals for various operations available?
o If so, are they available in a variety of media?
o Can the manuals be understood by intended users?
o Does the vendor have a strong Research and Development Division with adequate
staff?
o Will the vendor help in the smooth transition from the existing application to the new
one?
o What is the quantum of training that the vendor will provide?
o What is the backup facility that the vendor will provide?
 Cost

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o Is the cost quoted competitive and comprehensive?

o Are all the requested components included in the purchase price?
o Are there any hidden costs?
o Will the vendor provide support at an affordable cost?
 For acquiring Hardware any organisation would issue, an ITT (Invitation to Tender) or RFP
(Request for Proposal).

ITT or RFP
The ITT or RFP documents the requirements of organisation. It has to inter alia include the following:

 Information processing requirements: In terms of workload and performance

requirements in accordance with applications which are proposed to be implemented.
 Hardware requirements: In terms of Processing Speed, peripheral Devices and
Network capability required as per business need.
 System software applications: In terms of Operating System, Database management
Software and other system software requirements.
 Support requirements: In terms of post implementation support and training.
 Adaptability requirements: In terms of Compatibility with existing infrastructure and
up gradation capabilities.
 Constraints: In terms of Delivery dates
 Conversion requirements: In terms of testing, pricing, structure and schedule.

ITT or RFP evaluation

The bids received from vendor in response to ITT/ RFP have to be analysed based on defined
evaluation criteria for:

 Existing User Satisfaction

 Vendor Financial condition
 Maintenance facilities
 Delivery schedules
 Up gradation capabilities
 Benchmarking
 Contract terms (Right to audit)
 Price

Metrics for selecting Hardware

Some of the key metrics which are considered in selecting hardware are:

 Turnaround Time: Length of time for submission of the job and receipt of completed output.

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 Response Time: Length of time between submission of transaction and first character of
output.
 Throughput: The amount of work done over the period of time.
 Compatibility: Hardware to be procured compatible with the existing one.
 Capacity: In accordance with workload and performance requirements.
 Utilisation: Fit for the purpose it is to be acquired.

1.5.2 Hardware Maintenance Program

It is common for organisations to outsource the maintenance of computer hardware, which
includes any or all of desktops, servers, networks, cabling, etc. One of the important criteria that
need to be considered before finalizing the vendor is the issue of maintenance.

The organisation must have a hardware maintenance program that takes into consideration the
following:

 Which company takes care of what IT resource? For example, computers may be serviced
by one company and printers by another.
 How many times during a year does the vendor provide preventive maintenance and when?
 Was any problem reported in the past, and what corrective steps were suggested? This has
to be documented.
 What is the cost of maintenance? Has, at any time during the year, the amount spent on
maintenance exceeded the budgeted amount? If yes, the details have to be documented.
 Apart from the preventive maintenance schedule, how many times during the year did the
vendor come for servicing the equipment because of some snag failure?
 What is the MTBF (Mean-Time-Between-Failure) and MTTR (Mean-Time-To-Repair) value?
Typically, MTBF value must be high and MTTR value must be low.
1.5.3 Hardware Monitoring Procedures
Hardware monitoring procedures help in the hardware maintenance program. Malfunctioned
hardware causes server downtime. It is Important to employ tools for hardware monitoring. A good
monitoring solution leverages investment in existing hardware and monitoring agents.

 Benefits of hardware Monitoring:

o Flexible monitoring options
o Enhanced server uptime and proactive alerting
o Accurate root-cause diagnosis
o Reduce time to investigate and resolve
o Lower Total Cost of Ownership (TCO)
o Fast Return On Investment (ROI)
o Higher Quality of Service

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 The following are the typical reports that are generated:

o Hardware Error Reports: These reports provide details of failures, if any, of
hardware resources in an organisation.
o Availability Reports: These reports provide details on the availability of the
hardware, software and all associated systems. Being the life-line of the
organisation, the availability of IT division must be as per business requirement. If
there is any break-down, this report provides details on the same.
o Utilisation Report: All IT resources must be optimally used. If there is excessive
utilisation of a resource, steps have to be taken to correct it. Details on utilisation
parameters are automatically provided by tools used for monitoring utilisation.
These reports not only help in maintenance but also in effective planning for the future.

1.5.4 Data and Capacity Management

Capacity requirements for a Chartered Accountant’s firm are very different from that of a stock broking
firm or a retail grocery store. Capacity monitoring is essential to ensure that the challenge of selecting
the right size or capacity of the computing architecture (capacity of the various computer systems and
components) are appropriate to meet the business requirements. Capacity planning also ensures that
the expansion or reduction of resources takes place in line with the overall organisational growth or
reduction. Some of the key factors that influence the requirements of each of the key components
such as the input devices, RAM, CPU architecture and speed, HDD, output devices, networking
capability and capacity are:

 Volume of transactions,
 Complexity of computations, and
 Mode of input and output delivery.
For example, the choice of inappropriate and inadequate software can significantly reduce the
operational efficiency of a business and its productivity, which in turn can affect the achievement of
its objectives. In the present age, one of the main issues an organisation has to face is the constant
and never-ending growth of data and requirement for greater storage capacity along with the problem
of data safety, security and integrity. In modern day enterprises, which employ large scale database
applications or multimedia applications, the requirements for disk storage run from gigabytes to
terabytes. If a proper data and storage management mechanism is in place, problems of downtime,
business loss on account of lost data and insufficient storage space can be avoided.

The key issues in data and capacity management are:

 How to effectively manage rapidly growing volume of data?

 How to leverage data and storage technology to support business needs?
 What is the best data and storage management framework for an enterprising business
environment?

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 How to optimize the performance of the data storage hardware and software to ensure
high availability?
 What is the best way to achieve greater storage capacity?
 How effective is the current data backup and storage management system?
Capacity Planning is planning and monitoring of the computer resources to ensure that the available
resources are being used efficiently and effectively, in terms of

 CPU utilisation
 Computer Storage Utilisation
 Telecommunication and Wide Area Network bandwidth utilisation
 Terminal utilisation
 I/O channel utilisation etc.
Like every other investment in an organisation, IT investment too has to be justified on the basis of
Returns on Investment (ROI). The capacity of IT resources required, such as processor power, CPU
clock speed, hard disk capacity and number of terminals have to be planned meticulously keeping
the business requirements of the current and the near future and also the rate of technology
obsolescence so that the benefits from IT investments are realised.

Proper capacity planning has the following advantages:

 It assures appropriate infrastructure capacity levels to support existing and future business
functions.
 It reduces resource expenditures and IT operating costs.
 It improves application infrastructure availability.
 It enables prioritization and reallocation of existing applications, systems, and network
components.
 It projects future resource needs, protecting the infrastructure from slow-downs as capacity
demands increase.
 It facilitates improved support of new and existing applications.
1.5.5 Hardware Retirement
Computer Systems have a functional life. They should be replaced at the end of their useful life
or when the hardware becomes a barrier to the user. This occurs primarily when the Applications,
or the software required for business activity will not run effectively on the existing hardware; or
when the existing hardware has begun to malfunction on a repeated basis. Some of the key
issues to be addressed in hardware retirement are:

 What to do with the older assets as newer systems come online.

o Retiring IT equipment possesses data that may be sources of significant economic
return; Need to be recycled according to regulations.

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 Improper disposing of data and other IT assets

o Can cause embarrassing security breaches
o Increase costs
o Pose the risk of regulatory penalties.
 Policy is needed for
o Designating a system to be retired
o Establishing Data Archiving Requirements (data, code, etc.)
o Establishing Security Requirements (disposal, disposition, sensitive data, etc.)
o Removal of Data from System Hardware
o Removal of end-user devices or other equipment (racks, cradles, scanners, etc.)
o Closure of licensing and/or contracts
o Reallocation of resources (hardware, memory, support staff, etc.)
o Finalizing program budget
o Taking care of e-waste regulations
o Minimizing Environmental impact.

1.6 Auditing Hardware

 Review the hardware acquisition plan to determine:
o Whether the hardware acquisition plan is compared to business plan.
o Whether the environment is adequate for the current installed hardware and
provision made for new hardware to be added under the approved acquisition plan.
o Whether the acquisition plan has taken into consideration deficiencies noted in the
former.
o Whether the acquisition plan has taken into consideration technological
obsolescence of the installed equipment, as well as the new equipment in the plan.
o The adequacy of documentation for hardware and software specifications,
installation requirements and the likely lead-time associated with planned
acquisitions.

 Review the Microcomputer (PC) Acquisition Criteria to determine:

o Whether Management has issued written policy statements regarding the
acquisition and use of PC’s and that these statements have been communicated to
the users.
o Criteria for acquisition of PC’s have been developed and that procedures have been
established to facilitate the acquisition approval process.
o Requests for acquisition of PC’s are supported by cost benefit analysis.
o All PC’s are purchased through the IS purchasing department to take advantage of
volume discounts and standardization.

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 Review of the Capacity Management Policy and Procedures for hardware

o Whether the procedure in place will ensure continuous review of hardware and
system software performance and capacity.
o Whether the criteria issued in the performance monitoring plan are based on
historical data obtained from problem logs, processing schedules, accounting
system reports, preventive maintenance schedules and reports.

 Review Hardware performance-monitoring plan to determine, whether it

o Includes a review of problem logs, processing schedules, system reports, and job
accounting reports.

 Problem log review

o The problem log assists in identifying hardware malfunctions, operator actions, or
system resets that negatively affect the performance of the IT infrastructure. The IT
organisation should regularly monitor the problem log to detect potential IT resource
capacity issues.

 Review Hardware availability and performance reports

o Review and ensure that the services required by the organisation (CPU utilisation,
storage utilisation, bandwidth utilisation, and system uptime) are available when
needed and that maintenance procedures do not negatively impact the
organisation’s operations.

1.7 Summary
Modern organisations are heavily dependent on automated information systems for performing
processing of transactions whether it is related to delivery of product or services. The basic
infrastructure required to develop, maintain and sustain Information Systems is IT. Hardware is one
of the important components and includes the input, output, processing and storage devices. It is
important to understand functionality of various components of hardware as hardware is the important
resource in managing capacities for effective and efficient working of an enterprise. Investment in IT
hardware is a major investment and its maintenance is a major component of expenditure. Hence,
effective and optimum utilisation of IT asset is important function in in any organisation to ensure
organisational goals are achieved.

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1.8 References
 http://www.cio.in
 Ralph M. Stair, George W. Reynolds, ‘Principles of Information Systems’, Cengage Learning
 www.whatis.com
 www.howstuffworks.com
 www.google.com
 www.wikipedia.com
 www.youtube.com

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