INFORMATION SYSTEMS IN THE ENTERPRISE ENTERPRISE

INFORMATION INFORMATION

SYSTEMS IN THESYSTEMS IN THE

ENTERPRISEENTERPRISE

• What are the major types of systems in a business? What role do they play?

• How do information systems support the major business functions?

• Why should managers pay attention to business processes?

• What are the benefits and challenges of using enterprise systems?

OBJECTIVES

1. Integration: Different systems serve variety of functions, connecting organizational levels difficult, costly • Managers need to determine what level of system

integration is required and how much it is worth in money.

2. Enlarging scope of management thinking: Investments in enterprise systems are huge, they must developed over long period of time, and must be guided by common objectives. i.e. Use IS must be flexible to ensure long-term profit

MANAGEMENT CHALLENGES

Types of Information Systems

KEY SYSTEM APPLICATIONS IN THE ORGANIZATION

Organization can be divided into

strategic, management,

knowledge, and operational levels

and into

five major functional areas:

sales & marketing, manufacturing,

finance, accounting & Human resources.

Information systems serve each of these levels and

functions

Major Types of Systems

• Operational-level systems: Operational-level systems: IS that monitor the IS that monitor the

elementary activities and transactions of the organization.elementary activities and transactions of the organization.

• Knowledge-level systems: Knowledge-level systems: IS that support knowledge IS that support knowledge

and data workers in an organization.and data workers in an organization.

• Management-level systems: Management-level systems: IS that support the IS that support the

monitoring controlling decision-making, and administrative monitoring controlling decision-making, and administrative

activities of middle managers.activities of middle managers.

• Strategic-level systems: Strategic-level systems: IS that support the long-range IS that support the long-range

planning activities of senior management.planning activities of senior management.

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Type of System

ESS

DSS

MIS

KWS

OAS

TPS

Information Inputs

Aggregate date; external, internal

Low-volume data or massive databases optimized for data analysis; analytic models and data analysis tools

Summary transaction data; high-volume data; simple models

Design specifications; knowledge base

Documents; schedules

Transactions; events

Processing

Graphics; simulations; interactive

Interactive; simulations, analysis

Routine reports; simple models; low-level analysis

Modeling; simulations

Document manage-ment; scheduling; communication

Sorting; listing; merging; updating

Information Outputs

Projections; responses to queries

Special reports; decision analyses; responses to queries

Summary and exception reports

Models; graphics

Documents; schedules; mail

Detailed reports; lists; summaries

Users

Middle managers

Operations personnel; supervisors

Professionals; staff managers

Senior managers

Professionals; technical staff

Clerical workers

Characteristics of Information Processing Systems

INTERRELATIONSHIPS AMONG SYSTEMS

Business processes

• Refer to manner (methods) in which work is organized, coordinated, and focused to produce a valuable product or service

• Are concrete (actual) work flows of material, information, and knowledge- sets of activities

• Refer to Unique ways to coordinate work, information, and knowledge

• And the ways in which management chooses to coordinate work

Business Processes and Information Systems

ENTERPRISE APPLICATIONS

Business Processes and Information Systems

Information systems help organizations

• Achieve great efficiencies by automating parts of processes

• Rethink and streamline (simplify) processes

• Focus more in customer services


Enterprise Systems or ERP


ERP can integrate the key business processes of an entire firm into a single S/W that allows information to flow seamlessly through out the organization.

These systems focus primarily on internal processes but may include transactions with customers and venders

• Firm structure and organization: One organization (every one use similar process and information)

• Management Process: Firm-wide knowledge-based management processes (improve management reporting and Decision Making)

• Technology: Single, unified platform (Data have common, standardized definitions and formats that accept by the entire organization

• Business Capability: More efficient operations and customer-driven business processes (can respond efficiently to customer requests for requests and information

Benefits of Enterprise Systems


• Difficult to build: Require fundamental changes in the way the business operates

• Technology: Require complex pieces of software and large investments of time, money, and expertise (Min $15 Million)

• Centralized organizational coordination and decision making: May not be the best way for the firms to operate

Challenges of Enterprise Systems


Redesigning the Organization Redesigning the Organization with with

Information SystemsInformation Systems

Redesigning the Organization Redesigning the Organization with with

Information SystemsInformation Systems

• Explain how a company can develop information systems that fit its business plan

• Identify the core activities in the systems development process

OBJECTIVES

Information systems plan

Road map indicating direction of systems development:

• Rationale• Current Situation• Management Strategy• Implementation Plan• Budget

SYSTEMS AS PLANNED ORGANIZATIONAL CHANGE

Linking Information Systems to the Business Plan

How to Develop An Information Systems Plan?

Refer to MIS in Action



Business Functions:

Systems Analysis

Business Area: Business Area Analysis

Organizations:

Enterprise AnalysisTop-Down Approach

1. Enterprise Analysis or Business SystemsPlanning (BSP)

• Analysis of organization-wide information requirements that:• Examines the entire organization in

terms of organizational units, function, process and data elements

• Helps Identify key entities and attributes in the organization's data

Establishing Organizational Information Requirements

1. Enterprise Analysis Method

• Take a large sample of mangers and ask them how they use information….etc

• The result of survey are aggregated into subunits, functions, process and data materials.

• Organized the data elements into logical application groups


Disadvantage Enterprise Analysis

• Produces an enormous amount of data that is expensive to collect and difficult to analyze.

• Most of the interviews are conducted with senior or middle managers.

• Questions focus not on management’s critical objective but rather on what existing information is used.


2. Strategic Analysis or Critical SuccessFactors (CSF)

• Small number of easily identifiable operational goals

• Shaped by industry, firm, manager, and broader environment that are believed to assure the success of an organization.

• Used to determine information requirements of organization



Example Goals CSF

Profit concern

Earnings/share Automotive industry

Return on investment Styling

Market share Quality dealer system

New product Cost control Energy standards

Nonprofit Excellent healthcare Regional integration with other hospitals

Meeting government regulations

Improved monitoring of regulations

Future health needs Efficient use of resources

Critical Success Factors and Organizational Goals

2. Strategic Analysis or CSF Method

• Interview individual managers to determine CSFs.• Aggregate and analyze individual CSFs to identify

common and separate concerns.• Obtain management consensus on organizational

CSFs• Define ways to measure success in achieving

CSFs • Define data and processing needs• Define IS projects needed to fill needs• Priorities projects



Using CSFs to Develop Systems

Figure 12-2

Objective

• Determining benefits and costs of a system when they are difficult to quantify

• Dealing with the complexity of large-scale systems projects

UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS

• Projects with 12-24 month objectives

• Longer periods infrastructure investments

Two kinds of IS investments:

• Improvement in business processes to increase firm efficiency

• Improvements in management decision making

Two ways for producing value:


• Analysis of portfolio of potential applications within a firm

• Determines risks and benefits

• Selects among alternatives for information systems

Strategic Considerations Strategic Considerations

Portfolio Analysis: Seeks to develop

A System Portfolio



• A quick and sometimes compelling method for arriving at a decision on alternative systems

• The most important outcome of a scoring model is not the score but agreement on the criteria used to judge a system.

• Best practice is to cycle through the scoring model several times, changing the criteria and weights, to see how sensitive the outcome is to reasonable changes in criteria.

Scoring Models:


• Models using techniques for valuing financial options to evaluate information technology investments with uncertain returns

• Uses the financial industry concept of options valuation

• An option is the right, but not obligation, to act at a future date.

• An initial expenditure on IS technology creates the right, but not the obligation, to obtain the benefits associated with further development and deployment of the technology.

Real Options Pricing Models (ROPM):


• Capital investments cannot be traded on a market and differ in value based on the firm.

• Factors, such as prior expertise, skilled labor force, market conditions, and other factors

Real Options Pricing Models (ROPM): (Continued)


Value of IT project (real option) is a function of the following:

• Value of underlying IT asset (present value of expected revenues)

• Volatility of value of asset (exercise price)

• Risk-free interest rate

• Option time to maturity (length of project deferment)


• Any program that uses information technology to change business processes requires knowledge input

• The value of the knowledge used to produce improved outputs of the new process can be used as a measure of the value added

• Knowledge inputs can be measured in terms of learning time to master a new process, and a return on knowledge can be estimated

• Determines costs and benefits of changes in business processes from new information systems

Knowledge Value-Added Approach:

Feasibility studyFeasibility study

• Determining achievability of solution Determining achievability of solution

Establishing information requirementsEstablishing information requirements

• Stating information needs that new Stating information needs that new system must satisfysystem must satisfy

• Identifying who, when, where and how Identifying who, when, where and how components of informationcomponents of information

OVERVIEW OF SYSTEMS DEVELOPMENT

Overview

• Details how system will meet information Details how system will meet information requirements as determined by systems requirements as determined by systems analysisanalysis

• Specifications for the system solutionSpecifications for the system solution

• Should reflect user business priorities Should reflect user business priorities and information needsand information needs


Systems Design

ProgrammingProgramming

• Process of translating system specifications Process of translating system specifications into program codeinto program code

TestingTesting

• Checks whether the system produces Checks whether the system produces desired results under known conditionsdesired results under known conditions

• Unit testing, system testing, acceptance Unit testing, system testing, acceptance testing, test plantesting, test plan


Completing the Systems Development Process

Production and maintenanceProduction and maintenance

• Production is stage after new system is Production is stage after new system is installed and the conversion is completeinstalled and the conversion is complete

• Maintenance is changes in hardware, Maintenance is changes in hardware, software, documentation, or procedures of software, documentation, or procedures of production system to correct errors production system to correct errors


Completing the Systems Development Process

Application software packagesApplication software packages

• Set of prewritten, precoded application Set of prewritten, precoded application software programs commercially available software programs commercially available for sale or leasefor sale or lease

CustomizationCustomization

• Modification of software package to meet Modification of software package to meet organization’s unique requirements without organization’s unique requirements without destroying the software’s integritydestroying the software’s integrity

ALTERNATIVE SYSTEM-BUILDING APPROACHES

Application Software Packages

Request for Proposal (RFP)Request for Proposal (RFP)

• Detailed list of questions submitted to Detailed list of questions submitted to vendors of software or other servicesvendors of software or other services

• Determines how well vendor’s product Determines how well vendor’s product can meet organization’s specific can meet organization’s specific requirementsrequirements


Application Software Packages

• Development of information systems by Development of information systems by end users with little or no formal end users with little or no formal assistance from technical specialistsassistance from technical specialists

• Allows users to specify their own Allows users to specify their own business needs business needs


End-User Development