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Processes, Organizations, and Information Systems
Chapter 7
7-2
“How Much Money Does a System Own?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Who are the target customers and how to induce them to buy?• Doctors?
– Care about medicine and operations, some care about costs– Not focused on exercise.
• Insurance companies? – Exercise doesn’t prevent disease.– When people get in good shape, they live longer, and their long-
term health care expenses increase.
7-3
Who Will Pay?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Health clubs.• Employers.• Selling ad space to health clubs and manufacturers.• Social media–driven.• Can PRIDE support 10,000 people spinning at the same time?• Who to monetize PRIDE?
7-4
Study Questions
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Q1: What are the basic types of processes?Q2: How can information systems improve process quality?Q3: How do information systems eliminate problems of information silos?Q4: How do CRM, ERP, and EAI support enterprise processes?Q5: What are the elements of an ERP system?Q6: What are the challenges of implementing and upgrading enterprise
information systems?Q7: How do inter-enterprise IS solve the problems of enterprise silos?Q8: 2026?
7-5
Q1: What Are the Basic Types of Processes?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Business Process with Three Activities
7-6
How Do Structured Processes Differ from Dynamic Processes?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-7
How Do Processes Vary by Organizational Scope?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-8
Characteristics of Information Systems
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-9
Q2: How Can Information Systems Improve Process Quality?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Process efficiency– Ratio of outputs to inputs.
• Process effectiveness– How well a process achieves organizational strategy.
• How can processes be improved?– Change process structure.– Change process resources.– Change both.
7-10
How Can Information Systems Improve Process Quality?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Performing an activity.– Partially automated, completely automated.
• Augmenting human performing activity.– Ex: Common reservation system.
• Controlling data quality.– Ensure data complete and correct before continuing process
activities.
7-11
Q3: How Do Enterprise Systems Eliminate the Problem of Information Silos?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• What are the problems of information silos?– Data duplicated.– Data inconsistency.– Data isolated.– Disjointed processes.– Lack of integrated enterprise information.– Inefficiency: decisions made in isolation.– Increased cost for organization.
7-12
Problems Created by Information Silos
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-13
How Do Organizations Solve the Problems of Information Silos?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Integrate into single database.
• Revise applications.
• Allow isolation, manage to avoid problems.
7-14
An Enterprise System for Patient Discharge
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-15
Q4: How Do CRM, ERP, and EAI Support Enterprise Processes?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Business Process Reengineering (BPR)– Integrated data, enterprise systems create stronger, faster,
more effective linkages in value chains. – Difficult, slow, exceedingly expensive.– Key personnel determine how best to use new technology.– Requires high-level and expensive skills and considerable
time.
7-16
Emergence of Enterprise Application Solutions
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Inherent processes – Predesigned processes for using application.– “Industry best practices”.
• Customer relationship management (CRM).• Enterprise resource planning (ERP).• Enterprise application integration (EAI).
7-17
Customer Relationship Management (CRM)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Suite of applications, database, set of inherent processes.• Manage all interactions with customer through four phases of
customer life cycle.– Marketing, customer acquisition, relationship management,
loss/churn.• Supports customer-centric organization.
7-18
Customer Life Cycle
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-19
CRM Applications
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
CRM functionality varies
7-20
ERP Applications
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Primary purpose is integration
7-21
Pre-ERP Information System: Bicycle Manufacturer
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-22
ERP Information Systems
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-23
ERP Enabled Sales Dashboard
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-24
Enterprise Application Integration (EAI)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Connects system “islands.”• Enables communicating and sharing data.• Provides integrated information.• Provides integrated layer on top of existing systems while
leaving functional applications “as is.”• Enables gradual move to ERP.
7-25
Design and Implementation for the Five Components
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Virtual Integrated Database
7-26
So What? Who Fixes a Workflow Problem?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Computer programmer? No.• Network engineer? No.• Database administrator? No.• Someone with knowledge of business. Yes!
– If workflow involves information system, someone knowledgeable and comfortable working with technical people.
– You with help of a business analyst.
7-27
Ethics Guide: Dialing for Dollars
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Assume you are a salesperson.• Bad quarter. VP of Sales authorized a 20% discount on new
orders if customers take delivery prior to end of quarter so order can be booked for this quarter.
• VP says “Start dialing for dollars, and get what you can. Be creative.”
7-28
Unethical, Violate SEC Rules, or Fraudulent
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
1. Side letter2. Delayed discount3. Fictitious account
• Send email with return product agreement.• Offer product at full price, but agree to give 20% credit next
quarter.• Sell to fictitious company and ship product to your brother-in-
law’s garage.
7-29
Q5: What Are the Elements of an ERP System?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Hardware• ERP Application programs• ERP Databases• Business process procedures• Training and Consulting
7-30
True ERP Have Application that Integrate: (http://www.erpsoftware360.com/erp-101.htm)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Supply chain • Manufacturing • CRM • Human resources • Accounting
7-31
ERP Solution Components
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• ERP Application Programs– Configurable vendor applications.
• ERP Databases– Trigger Computer program within database to keep database
consistent when certain conditions arise.• Stored Procedure
Enforces business rules.
7-32
ERP Solution Components (Cont’d)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Business Processes and Procedures– Adapt to inherent processes and procedures, or design new ones?
• Training & Consulting– Training to implement.– Top management support, preparing for change, dealing with
resistance.– Training to use.
• Industry-Specific Solutions
7-33
Example of SAP Ordering Business Process Blueprint
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-34
Example of SAP Ordering Business Process Blueprint (cont’d)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-35
Characteristics of Top ERP Vendors
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-36
Q6: What Are the Challenges of Implementing and Upgrading Enterprise Information Systems?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-37
Q7: How Do Inter-enterprise IS Solve the Problems of Enterprise Silos?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-38
Inter-enterprise PRIDE System
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-39
Q8: 2026?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• ERP vendors and customers resolved problems of cloud-based ERP.• Hybrid model
– ERP customers store most of their data on cloud servers managed by cloud vendors and store sensitive data on their own servers.
• Gov’t, accounting, financial standards for monitoring organizations for appropriate compliance.
• Delicate balance between risk of loss and improvement to processes.• Machines able to employ ERP system to schedule own maintenance.
7-40
Security Guide: One-Stop Shopping
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• IS design involves constant trade-offs. – Risk of loss higher, security focused.– Inter-enterprise system can connect competitors with
different incentives and agendas.– How secure is the cloud vendor?– BitcoinCentrally located, accessible from anywhere, very large
sum of electronic money.
7-41
Using the Guide: ERP and the Standard, Standard Blueprint
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Organization adapts processes to standard blueprints.• If all firms in an industry use same business processes, how
can a firm gain competitive advantage?• How will innovation occur?• Does “commoditized” standard blueprint prevent sustaining a
competitive advantage?
7-42
Active Review
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Q1: What are the basic types of processes?Q2: How can information systems improve process quality?Q3: How do information systems eliminate the problems of information silos?Q4: How do CRM, ERP, and EAI support enterprise processes?Q5: What are the elements of an ERP system?Q6: What are the challenges of implementing and upgrading enterprise
information systems?Q7: How do inter-enterprise IS solve the problems of enterprise silos?Q8: 2026?
7-43
Case Study 7: A Tale of Two Inter-organizational IS
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Access CT – Enrolled 208,301 and model for state-run exchanges.
• Cover Oregon– Spent $250 million for system clearly inoperable– Exchange’s board of directors decided to stop development
and utilize the federal exchange.
7-44
Healthcare ExchangeInterorganizational IS
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
7-45
Access CT
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Exchange went live in only 12 months.• Counihan
– More than 30 years of experience working in insurance industry,
– Key player in development of Massachusetts healthcare system.
• Hired senior staff with deep experience in insurance.
7-46
Access CT (cont'd)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Wadleigh director of application development for CIGNA, a health services organization.
• Primary assignment• Hire and manage an outside contractor to develop exchange
website and supporting backend code, and manage implementation of exchange information system.
• Created project plan and began search for contractor to develop the site.
7-47
Cover Oregon
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Did not hire a supervising contractor for project, instead took an active role in software’s development.
• Agency suffered high employee turnover, and had difficulty hiring and keeping qualified personnel.
7-48
Cover Oregon (cont'd)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• OHA hired software development company to create major software components. – Two of three finalists dropped out at last minute, leaving Oracle
Corporation a sole source vendor. – Oracle negotiated time and materials contracts instead of contract
for specific deliverables at specific prices. – When problems developed, Oracle was paid tens of millions of
additional money for change orders on same time and materials basis.
7-49
Cover Oregon (cont'd)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Oregon legislature required state to hire a quality assurance contractor, Maximus Corporation, to oversee project.
• Maximus reported significant problems involving divided control, lack of clear requirements, inappropriate contracting methodology, lack of project planning, and lack of progress.
• Unclear who got those reports or what was done with them.• Head of OHA project threatened to withhold Maximus’ payment.
• End result: Exchange development failed.
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .