Learning objectives

Define and describe business processes and their relationship to information systems. Evaluate the role played by systems serving the various levels of management in a business and their relationship to each other. Explain how enterprise applications, collaboration and communication systems, and intranets improve organizational performance. Assess the role of the information systems function in a business.

Learning objectives
Define and describe business processes and their relationship to information systems. Evaluate the role played by systems serving the various levels of management in a business and their relationship to each other. Explain how enterprise applications, collaboration and communication systems, and intranets improve organizational performance. Assess the role of the information systems function in a business.

Learning objectives (more...)

Demonstrate how Porters competitive forces model helps companies develop competitive strategies using Information Systems.

Business Processes

Business Processes and Information Systems

Business processes: - Workflows of material, information, knowledge - Sets of activities, steps - May be tied to functional area or be cross-functional
Businesses: Can be seen as collection of business processes - Business processes may be assets or liabilities

Examples of functional business processes

Manufacturing and production o Assembling the product Sales and marketing o Identifying customers Finance and accounting o Creating financial statements Human resources o Hiring employees

The Order Fulfilment Process

Fulfilling a customer order involves a complex set of steps that requires the close coordination of the sales, accounting, and manufacturing functions.

Business Processes and Information Systems

Information technology enhances business processes in two main ways: Increasing efficiency of existing processes - Automating steps that were manual Enabling entirely new processes that are capable of transforming the businesses - Change flow of information - Replace sequential steps with parallel steps - Eliminate delays in decision making

Classes of Information Systems

(and the target audience)

Classes of Information Systems

Transaction processing systems (TPS) Perform and record daily routine transactions necessary to conduct business o Examples: sales order entry, payroll, shipping Allow managers to monitor status of operations and relations with external environment Serve operational levels Serve predefined, structured goals and decision making

A Payroll TPS

A TPS for payroll processing captures employee payment transaction data (such as a time card). System outputs include online and hard-copy reports for management and employee paychecks.

AN LSBF TPS
Swipe card system is a TPS system Characteristics
o o o o

Rapid Response Reliability Inflexibility Controlled Processing

WHY?

Management Information Systems (MIS)

Serve middle management

Provide reports on firms current performance, based on data from TPS

Provide answers to routine questions with predefined procedure for answering them Typically have little analytic capability

AN LSBF MIS
Student Attendance Reporting Tool is an MIS Characteristics
o o o o

Integration Centralized Software system Flexible reporting

WHY?

How Management Information Systems obtain their Data from the Organisations TPS

In the system illustrated by this diagram, three TPS supply summarized transaction data to the MIS reporting system at the end of the time period. Managers gain access to the organizational data through the MIS, which provides them with the appropriate reports.

Decision Support Systems (DSS)

Serve middle management (and questions from executive!) Support non-routine (PREDICTIVE!) decision making o Example: What is impact on production schedule if December sales doubled? Often use external information as well from TPS and MIS

Model driven DSS o Voyage-estimating systems

Data driven DSS o Intrawests marketing analysis systems

AN LSBF DSS
DSS is a complicated system Characteristics
o o o o

Large Amounts of Data Many data sources (Internal + External) Requires knowledgeable user Very Flexible + Predictive

WHY?

Executive Support Systems (ESS)

Support senior management Address non-routine decisions requiring judgment, evaluation, and insight Incorporate data about external events (e.g. new tax laws or competitors) as well as summarized information from internal MIS and DSS Example: ESS that provides minute-to-minute view of firms financial performance as measured by working capital, accounts receivable, accounts payable, cash flow, and inventory

Example of an Executive Support System

This system pools data from diverse internal and external sources and makes them available to executives in easy-to-use form.

A Brief Look at some popular Enterprise Systems Specifically: ERP, CRM, SCM, KM

Enterprise Systems
Span functional areas Execute business processes across firm Include all levels of management

Four major applications: - Enterprise Resource Planning systems - Supply chain management systems - Customer relationship management systems - Knowledge management systems

Enterprise Systems

Enterprise applications Automate processes Span multiple business functions Span organizational levels Often extend outside the organization.

 Enterprise Resource Planning (ERP) Collects data from different firm functions and stores data in single central data repository Resolves problem of fragmented, redundant data sets and systems Enable: o Coordination of daily activities o Efficient response to customer orders (production, inventory) o Provide valuable information for improving management decision making

Example: Enterprise Resource Planning (ERP)

Example: Supply Chain Management Systems (SCM)

Manage firms relationships with suppliers Share information about: o Orders, production, inventory levels, delivery of products and services Goal: Right amount of products to destination with least amount of time and lowest cost

Example of a Supply Chain Management System

Customer orders, shipping notifications, optimized shipping plans, and other supply chain information flow among Haworths Warehouse Management System (WMS), Transportation Management System (TMS), and its back-end corporate systems

Example: Customer Relationship Management Systems (CRM)

Provide information to coordinate all of the business processes that deal with customers in sales, marketing, and service to optimize revenue, customer satisfaction, and customer retention Integrate firms customer-related processes and consolidate customer information from multiple communication channels

Salesforce.com CRM ESS

Illustrated here are some of the capabilities of Salesforce.com, a market-leading provider of on-demand customer relationship management (CRM) software. CRM systems integrate information from sales, marketing, and customer service.

Example: Knowledge Management Systems (KMS)

Support processes for acquiring, creating, storing, distributing, applying, integrating knowledge Collect internal knowledge and link to external knowledge Include enterprise-wide systems for: - Managing documents, graphics and other digital knowledge objects - Directories of employees with expertise

The structure of the IT Department in the Organization

Department: The Information Systems Function in Business

Information systems department: - Formal organizational unit responsible for information technology services - Includes programmers, systems analysts, project leaders, information systems managers - Often headed by chief information officer (CIO), also includes chief security officer (CSO) and chief knowledge officer (CKO) End-users: - Representatives of other departments, for whom applications are developed

Organising Information Systems Function

Small firm may not have formal information systems group
Larger companies typically have separate department which may be organized along one of several different lines: Decentralised (within each functional area) Separate department under central control Each division has separate group but all under central control

Organising Information Systems Function Separate department under central control

WHY? Economies of Scale Overlap of IS Centralized IS spans departments Skill crisis Risks IT department doesnt listen to anyone Technology Driven
B: A separate department under central control

Reports To

Organising Information Systems Function Decentralised

WHY? More Agile The needs of the departments are so different. Often a sign of immature IT in an organization.

Organising Information Systems Function Large multidivisional company but under centralised control
WHY? The needs of the departments are so different. This appears to be intelligent choice for this organization. Different parts of the IT department are assigned to different functional groups, but managed by IT hierarchy of managers.

C: Represented in each division of a large multidivisional company but under centralised control

Using IT to give the FIRM an advantage in the INDUSTRY.

Using Information Systems to achieve Competitive Advantage How can we make our organization more competitive?
o

Understand the Industry!

Michael Porters competitive forces model o Five competitive forces shape fate of firm in the industry
The bargaining power of suppliers The threat of the entry of new competitors The intensity of competitive rivalry The threat of substitute products or services The bargaining power of customers (buyers)

Example: Supplier Bargaining Power

How can we reduce Supplier Bargaining Power?
Increase the number of suppliers (Reverse Auctions) Understand supplier so you have a bargaining advantage
o

(understand the margins of the suppliers)

Example: Customer Bargaining Power

How can we understand / affect Customer Bargaining Power?
Understand the price sensitivity (use DSS system) Understand features that the customer values, differentiate (CRM system) Lower the price for the customer (SCM system)

Lock the customer in (Build Apple style ecosystem)

Example: Competitive Rivalry

How can we understand / affect Competitive Rivalry?
Innovate using Information Systems Understand how other firms will react to our actions based on historical data Put pressure on other firms by lowering our costs (better SCM for example)

More information ...

Greasly, A. (2004) Simulation Modelling for Business, Hants, Ashgate Publishing Marchand, D.A., Davenport, T.H.(2000) Mastering Information Management, Harlow, Financial Times/Prentice Hall Marchand, D.A., Kettinger, W.J. (2002) Information Orientation, New York, oxford University Press Porter, M. (2004) Competitive Strategy, New York, Free Press