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Lecture-2- The Strategic Role of Information Systems
1
Information Systems
ThepulThepul GinigeGinige
LEARNING OBJECTIVES
• Analyze roles of 6 types of
information systems
• Describe types of information • Describe types of information
systems
• Analyze relationships between
business processes
2
LEARNING OBJECTIVES
• Explain how systems & networks
create new efficiencies
• Evaluate benefits & limitations of • Evaluate benefits & limitations of
systems & networks
3
MANAGEMENT CHALLENGES
• Key system applications
• Functional perspective of systems
• Integrating functions & processes• Integrating functions & processes
4
MANAGEMENT CHALLENGES1. INTEGRATION: Different systems serve
variety of functions, connecting
organizational levels difficult, costly
2. ENLARGING SCOPE OF MANAGEMENT 2. ENLARGING SCOPE OF MANAGEMENT
THINKING: Huge system investments,
long development time must be guided
by common objectives
5
TYPES OF INFORMATION SYSTEMSTYPES OF INFORMATION SYSTEMSTYPES OF INFORMATION SYSTEMSTYPES OF INFORMATION SYSTEMSTYPES OF INFORMATION SYSTEMSTYPES OF INFORMATION SYSTEMSTYPES OF INFORMATION SYSTEMSTYPES OF INFORMATION SYSTEMS
KIND OF SYSTEM GROUPS SERVEDKIND OF SYSTEM GROUPS SERVED
STRATEGIC LEVEL SENIOR STRATEGIC LEVEL SENIOR MANAGERSMANAGERS
MANAGEMENT LEVEL MIDDLE MANAGEMENT LEVEL MIDDLE MANAGERSMANAGERS
6
DATA WORKERSDATA WORKERS
MANAGERSMANAGERS
OPERATIONAL OPERATIONAL OPERATIONAL OPERATIONAL LEVEL MANAGERS LEVEL MANAGERS
KNOWLEDGE LEVEL KNOWLEDGE & KNOWLEDGE LEVEL KNOWLEDGE &
SALES & MANUFACTURING FINANCE ACCOUNTI NG HUMANSALES & MANUFACTURING FINANCE ACCOUNTI NG HUMANRESOURCESRESOURCESMARKETINGMARKETING
MAJOR TYPES OF SYSTEMS
1. EXECUTIVE SUPPORT SYSTEMS (ESS)
2. DECISION SUPPORT SYSTEMS (DSS)
3. MANAGEMENT INFORMATION SYSTEMS (MIS)
4. KNOWLEDGE WORK SYSTEMS (KWS)4. KNOWLEDGE WORK SYSTEMS (KWS)
5. OFFICE AUTOMATION SYSTEMS (OAS)
6. TRANSACTION PROCESSING SYSTEMS (TPS)
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TYPICAL TPS APPLICATIONS
Sales & Marketing Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Sales management, market research,
promotion, pricing, new productspromotion, pricing, new products
MAJOR APPLICATION SYSTEMS:
• Sales order info system, market
research system, pricing system
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TYPICAL TPS APPLICATIONSManufacturing & Production Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Scheduling, purchasing, shipping, receiving, engineering, operations
MAJOR APPLICATION SYSTEMS:MAJOR APPLICATION SYSTEMS:
• Materials resource planning systems, purchase order control systems, engineering systems, quality control systems
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TYPICAL TPS APPLICATIONSFinance & Accounting Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Budgeting, general ledger, billing, cost accounting
MAJOR APPLICATION SYSTEMS:
• General ledger, accounts receivable, accounts payable, budgeting, funds management systems
10
TYPICAL TPS APPLICATIONSHuman Resources Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Personnel records, benefits,
compensation, labor relations, trainingcompensation, labor relations, training
MAJOR APPLICATION SYSTEMS:
• Payroll, employee records, benefit
systems, career path systems, personnel
training systems
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TYPICAL TPS APPLICATIONS
Other Types (e.g., University)
MAJOR FUNCTIONS OF SYSTEMS:
• Admissions, grade records, course
records, alumnirecords, alumni
MAJOR APPLICATION SYSTEMS:
• Registration system, student transcript
system, curriculum class control system,
alumni benefactor system
12
OFFICE AUTOMATION SYSTEMS (OAS)
• Toward a “paperless” office
• Redesign of work flow
• Integrated software• Integrated software
• Ergonomic design
• Bright, cheerful work spaceEXAMPLE: PRESENTATION GRAPHICS
13
KNOWLEDGE WORK SYSTEMS (KWS)
KNOWLEDGE LEVEL
• INPUTS: DESIGN SPECS
• PROCESSING: MODELLING• PROCESSING: MODELLING
• OUTPUTS: DESIGNS, GRAPHICS
• USERS: TECHNICAL STAFF
EXAMPLE: ENGINEERING WORK STATION
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MANAGEMENT INFORMATION SYSTEMS (MIS)
MANAGEMENT LEVEL
• INPUTS: HIGH VOLUME DATA
• PROCESSING: SIMPLE MODELS
• OUTPUTS: SUMMARY REPORTS• OUTPUTS: SUMMARY REPORTS
• USERS: MIDDLE MANAGERS
EXAMPLE: ANNUAL BUDGETING
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MANAGEMENT INFORMATION SYSTEMS (MIS)
• Structured & semi-structured decisions
• Report control oriented• Report control oriented
• Past & present data
• Internal orientation
• Lengthy design process
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MISMISSALES DATA
UNIT PRODUCT
TPS
Order Processing
System
ORDER FILE
TPS DATA FOR MIS APPLICATIONS
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MIS FILESMIS FILES
PRODUCT COST
PRODUCT CHANGE DATA
EXPENSE DATA
MISREPORTS
MANAGERSMANAGERS
Materials Resource
Planning System
General Ledger
System
ORDER FILE
PRODUCTION MASTER FILE
ACCOUNTING FILES
DECISION SUPPORT SYSTEMS (DSS)
MANAGEMENT LEVEL
• Inputs: low volume data
• Processing: interactive• Processing: interactive
• Outputs: decision analysis
• Users: professionals, staffEXAMPLE: CONTRACT COST ANALYSIS
18
DECISION SUPPORT SYSTEMS (DSS)
• Flexible, adaptable, quick
• User controls inputs/outputs
• No professional programming• No professional programming
• Supports decision process
• Sophisticated modeling tools
19
EXECUTIVE SUPPORT SYSTEMS (ESS)
STRATEGIC LEVEL
• Inputs: aggregate data
• Processing: interactive• Processing: interactive
• Outputs: projections
• Users: senior managers
EXAMPLE: 5 YEAR OPERATING PLAN
20
EXECUTIVE SUPPORT SYSTEMS (ESS)
• Top level management
• Designed to the individual
• Ties CEO to all levels• Ties CEO to all levels
• Very expensive to keep up
• Extensive support staff
21
INTERRELATIONSHIPS AMONG SYSTEMS
ESS
DSSMIS
22
TPSKWS
OAS
DSSMIS
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE
• Sales & marketing systems
• Manufacturing & production
systemssystems
• Finance & accounting systems
• Human resources systems
23
SALES & MARKETING INFORMATION SYSTEM
SALES
SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL
24
ORDER PROCESSING ENTER, PROCESS, TRACK ORDERS OPERATIONAL
MARKET ANALYSIS IDENTIFY CUSTOMERS & MARKETS KNOWL EDGE
PRICING ANALYSIS DETERMINE PRICES MANAGEMENT
SALES TRENDS PREPARE 5-YEAR FORECASTS STRATEGIC
MANUFACTURING
INFORMATION SYSTEM
MFGSYSTEM DESCRIPTION ORGANIZATIONAL LEVEL
MACHINE CONTROL CONTROL ACTIONS OF EQUIPMENT OPERA TIONAL
25
COMPUTER-AIDED-DESIGN DESIGN NEW PRODUCTS KNOWLEDG E
PRODUCTION PLANNING DECIDE NUMBER, SCHEDULE OF PRO DUCTS MANAGEMENT
FACILITIES LOCATION DECIDE WHERE TO LOCATE FACILIT IES STRATEGIC
FINANCE & ACCOUNTING INFORMATION
SYSTEM
FINANCESYSTEM DESCRIPTION ORGANIZATIONAL LEVEL
ACCOUNTS RECEIVABLE TRACK MONEY OWED TO FIRM OPERATIONAL
26
ACCOUNTS RECEIVABLE TRACK MONEY OWED TO FIRM OPERATIONAL
PORTFOLIO ANALYSIS DESIGN FIRM'S INVESTMENTS KNOWL EDGE
BUDGETING PREPARE SHORT TERM BUDGETS MANAGEMENT
PROFIT PLANNING PLAN LONG-TERM PROFITS STRATEGIC
HUMAN RESOURCES INFORMATION SYSTEM
HUMAN RESOURCESSYSTEM DESCRIPTION ORGANIZATIONAL LEVEL
TRAINING & DEVELOPMENT TRACK TRAINING, SKILLS, APPRAISALS OPERATIONAL
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TRAINING & DEVELOPMENT TRACK TRAINING, SKILLS, APPRAISALS OPERATIONAL
CAREER PATHING DESIGN EMPLOYEE CAREER PATHS KNOWLE DGE
COMPENSATION ANALYSIS MONITOR WAGES, SALARIES, BEN EFITS MANAGEMENT
HUMAN RESOURCES PLANNING PLAN LONG-TERM LABOR FORC E NEEDS STRATEGIC
EXAMPLES OF BUSINESS PROCESSES
• MANUFACTURING & PRODUCTION:
Assembling product, checking
quality, producing bills of materialsquality, producing bills of materials
• SALES & MARKETING: Identifying
customers, creating customer
awareness, selling
28
EXAMPLES OF BUSINESS PROCESSES
• FINANCE & ACCOUNTING: Paying creditors, creating financial statements, managing cash accountsaccounts
• HUMAN RESOURCES: Hiring employees, evaluating performance, enrolling employees in benefits plans
29
SUPPLY-CHAIN MANAGEMENT
PLANNING & PLANNING & FORECASTINGFORECASTING
ORDER ORDER PROCESSINGPROCESSING
PROCUREMENTPROCUREMENT
ACCOUNTINGACCOUNTING
SUPPLIERSSUPPLIERSCUSTOMERSCUSTOMERS
INTRANETINTRANETINTRANET
30
SHIPPINGSHIPPING INVENTORYINVENTORY
PRODUCTIONPRODUCTION
ACCOUNTINGACCOUNTING
LOGISTICS LOGISTICS SERVICESSERVICES
DISTRIBUTORSDISTRIBUTORS
INTRANETINTRANETINTRANET
HOW INFORMATION SYSTEMS FACILITATES
SUPPLY CHAIN MANAGEMENT
DecideDecide when,when, whatwhat toto produce,produce, store,store, movemove……
rapidlyrapidly communicatecommunicateorders,orders, tracktrack orderorder status,status,checkcheck
31
rapidlyrapidly communicatecommunicateorders,orders, tracktrack orderorder status,status,checkcheckinventoryinventory availability,availability, monitormonitor levels,levels, tracktrack shipments,shipments,planplan productionproduction basedbased onon actualactual demanddemand……rapidlyrapidlycommunicatecommunicate productproduct designdesign changeschanges……provideprovide productproductspecificationsspecifications…… shareshare informationinformation aboutabout defectdefect rates,rates,returnsreturns......
TRADITIONAL VIEW OF SYSTEMS
• WITHIN THE BUSINESS: There are functions, each having its uses of information systems
• OUTSIDE THE ORGANIZATION’S • OUTSIDE THE ORGANIZATION’S BOUNDARIES: There are customers and vendors
FUNCTIONS TEND TO WORK IN ISOLATION
32
BENEFITS OF ENTERPRISE SYSTEMS
• FIRM STRUCTURE & ORGANIZATION: One
organization
• MANAGEMENT: Firm wide knowledge-
based management processesbased management processes
• TECHNOLOGY: Unified platform
• BUSINESS: More efficient operations &
customer-driven business processes
33
CHALLENGES OF ENTERPRISE SYSTEMS
• Daunting implementation
• High up front costs & future
benefitsbenefits
• Inflexibility
• Hard to realize strategic value
34
INDUSTRIAL NETWORKS
LINK FIRMS INTO INDUSTRY-WIDE
SYSTEM
• HORIZONTAL: Link firms in same
industry, including competitorsindustry, including competitors
• VERTICAL: Link firm with suppliers
in same industry
35
Emerging information system trends in
organisations
36
Enterprise Resource Planning systems
Enterprise Resource Planning systems(ERP) are
software systems for businesses management
encompassing modules supporting functionalencompassing modules supporting functional
areas such as Manufacturing , Accounting,
Finance, Sales & Marketing, Human Resource,
ect.
37
ENTERPRISE SYSTEM
AccountingManufacturing
Business ProcessesBusiness Processes
EnterpriseEnterprise --wide wide Vendors Customers
38
Sales & Marketing
FinanceHuman
Resources
EnterpriseEnterprise --wide wide Business ProcessesBusiness Processes
Vendors Customers
ERP system contd..
• ERP is a commodity -- product in the form of
software
• SAP, Oracle Applications, PeopleSoft, JD
Edwards, Greatplains etc. are world’s leading Edwards, Greatplains etc. are world’s leading
ERP packages
• The market leader is “SAP”
39
Features of an ERP system
• Architecture of ERP system facilitates
transparent integration of modules providing
flow of information between all function
within enterprise in real time.
• Many different software are replaced by one • Many different software are replaced by one
integrated system.
• Reliable information access through common
DBMS
• Eliminates data and operational redundancies
(no duplication of work or data entries etc.)40
Features of an ERP system contd..
• Cost reduction through time saving, improved control by
organizational wise analysis of organizational decisions.
• Delivery and cycle time reduction
• Scalable systems
• Global outreach through extended modules such as CRM or
SCMSCM
• E-Business
• Providing business solutions in support of core processes
• Process-oriented view cutting across functions of an
enterprise
• Huge potential for customizing41
Business and Technical Benefits
• Automation of business transactions
• Flexibility in changing the system catering to newer business processes.
• Coordination across business functions• Coordination across business functions
• Coordination across geographical distances resulting in better Managerial control
• Consistent information and interface thus easier to understand and work in
• Single system42
Prime Reasons for Implementing ERP
• Need for common platform
• Process improvement.
• Data visibility that could be used to improve
operating decisions.operating decisions.
• Operation cost reductions.
• Increased customer responsiveness.
• Improved strategic decision making
• Personal Improvement 43
Knowledge Management
• Knowledge management is the process of
capturing, distributing, and effectively using
knowledge.
• So it’s a discipline that promotes an integrated
approach to identifying, capturing, evaluating, approach to identifying, capturing, evaluating,
retrieving, and sharing all of an enterprise's
information assets. These assets may include
databases, documents, policies, procedures,
and previously un-captured expertise and
experience in individual workers.44
Explicit, Implicit and Tacit
Knowledge
• Explicit: information or knowledge that is set
out in tangible form.
• Implicit: information or knowledge that is not
set out in tangible form but could be made set out in tangible form but could be made
explicit.
• Tacit: information or knowledge that one
would have extreme difficulty operationally
setting out in tangible form.
45
Customer Relationship Management (CRM)
• Customer relationship management (CRM)
refers to the practices, strategies and
technologies that companies use to manage,
record and evaluate customer interactions in record and evaluate customer interactions in
order to drive sales growth by deepening and
enriching relationships with their customer
bases.
46
The CRM StrategyThe CRM strategy allows you to following:
• Understand the customer
• Retain customers through better customer
experience
• Attract new customers• Attract new customers
• Win new clients and contracts
• Increase profitably
• Decrease customer management costs
47
The Impact of Technology on CRM
• Technology and the Internet have changed the
way companies approach customer relationship
strategies. Advances in technology have changed
consumer buying behavior, and today there are consumer buying behavior, and today there are
many ways for companies to communicate with
customers and to collect data about them. With
each new advance in technology — especially the
proliferation of self-service channels like the Web
and smartphones — customer relationships are
being managed electronically.48
The Benefits of CRM
• The biggest benefit most businesses realize
when moving to a CRM system comes directly
from having all your business data stored and
accessed from a single location. Before CRM accessed from a single location. Before CRM
systems, customer data was spread out over
office productivity suite documents, email
systems, mobile phone data and even paper
note cards and Rolodex entries
49
• Storing all the data from all departments (e.g.,
sales, marketing, customer service and HR) in
a central location gives management and
employees immediate access to the most employees immediate access to the most
recent data when they need it. Departments
can collaborate with ease, and CRM systems
help organization to develop efficient
automated processes to improve business
processes.
50
• Other benefits include a 360-degree view of
all customer information, knowledge of what
customers and the general market want, and
integration with your existing applications to integration with your existing applications to
consolidate all business information.
51
Electronic Commerce
• Electronic Commerce (EC) is where business transactions
take place via telecommunications networks, especially
the Internet.
– Electronic commerce describes the buying and selling
of products, services, and information via computer of products, services, and information via computer
networks including the Internet.
– The infrastructure for EC is a networked computing
environment in business, home, and government.
– E-Business describes the broadest definition of EC. It
includes customer service and intrabusiness tasks. It is
frequently used interchangeably with EC.
52
The Driving Forces of
Electronic Commerce
• The New World of Business
– Business pressures
– Organizational responses– Organizational responses
– The role of Information Technology (including
electronic commerce)
53
Electronic Commerce Terms
• Business-to-business (B2B)
– Businesses make online transactions purchases
with other business
• Business-to-consumer (B2C)• Business-to-consumer (B2C)
– Online transactions between businesses and
consumers
• Consumer-to-Consumer (C2C)
– Online auctions, posting to newspaper sites,
personal websites, e-commerce portals
54
Electronic Commerce Terms (cont.)
• Pure vs. Partial EC: based on the degree of digitization of
– Product
– Process
– Delivery agent
• Traditional commerce: all dimensions are physical• Traditional commerce: all dimensions are physical
• Pure EC: all dimensions are digital
• Partial EC: all other possibilities include a mix of digital
and physical dimensions
55
The Dimensions of E-Commerce
56
Benefits of ecommerce
• Discuss the benefits to
• Business
• Customer
57