1 IT is moving at blinding speed Key challenges for Managers The Strategic Business Challenge: How can business use IT to become competitive, effective,

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IT is moving at blinding speed Key challenges for Managers

• The Strategic Business Challenge:How can business use IT to become competitive, effective, and digitally enabled?

Companies spend thousands of dollars on hardware and software, only to find that most of the technology actually goes unused.

The power of computer hardware and software has grown much more rapidly than the ability of organisations to apply and use this technology.

Usually because they didn't pay attention to the full integration of the technology into the organization. Merely buying the technology without exploiting the new opportunities it offers for doing business smarter and better doesn't accomplish much.

Think and rethink everything you do and figure out how you can do it better. Change is inevitable, and information must be managed just as you would any other resource.

Challenges Of Information SystemsChallenges Of Information Systems

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• The Globalization Challenge:

The world becomes smaller every day. Competition increases among countries as well as companies.

A good Management Information System meets both domestic and foreign opportunities and challenges.

To develop integrated, multinational, information systems, business must develop global hardware, software and communications standards, create cross-cultural accounting and reporting software and design transactional business processes.

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• The Information Architecture Challenge: how ca organisations develop an information architecture and information technology infrastrusture that can support their goals when business conditions and technologies are changing so rapidly?

You have to decide what business you are in, what your core competencies are, and what the organization's goals are. Those decisions drive the technology, instead of the technology driving the rest of the company.

Purchasing new hardware involves more than taking the machine out of the box and setting it on someone's desk. Take care of the people and they will take care of the rest!

Information architecture describes how to incorporate technology into the mainstream processes in which the business is involved. – How will the new Information System support getting the product produced and

shipped?– How will Advertising and Marketing know when to launch ad campaigns? – How will Accounting know when to expect payment?


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• The Information Systems Investment Challenge: How can organisations determine the business value of information systems?

Too often managers look at their technological investments in terms ofthe cost of new hardware or software. They overlook the costs associated with the non-technical side of technology.

It’s one thing to use IT to design, produce, deliver, and maintain new products & another thing to make money doing it.

– Is productivity up or down? – What is the cost of lost sales opportunities and lost customer

confidence from a poorly managed E-Business Web site? – How do you determine if your Management Information System is

worth it?


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• The Responsibility and Control Challenge: How to design information systems that people can control and understand?

Although information systems have provided enormous benefits they have also created new challenges. Think about the positive & negative impacts of IS??

Remember, humans should drive the technology, not the other way around. Too often we find it easier to blame the computer for messing up than to realize it's only doing what a human being told it to do.

Your goal should be to integrate the technology into the world of people. Humans do control the technology, and as a manager, you shouldn't lose sight of that.


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THE ORGANISATIONAL STRUCTURE THE ORGANISATIONAL STRUCTURE

DATA WORKERSDATA WORKERS

KIND OF SYSTEM GROUPS SERVEDKIND OF SYSTEM GROUPS SERVED

STRATEGIC LEVEL SENIOR STRATEGIC LEVEL SENIOR MANAGERSMANAGERS

MANAGEMENT LEVEL MIDDLE MANAGEMENT LEVEL MIDDLE MANAGERSMANAGERS

OPERATIONAL OPERATIONAL

OPERATIONAL LEVEL OPERATIONAL LEVEL MANAGERS MANAGERS

KNOWLEDGE LEVEL KNOWLEDGE & KNOWLEDGE LEVEL KNOWLEDGE &

SALES & MANUFACTURING FINANCE ACCOUNTING HUMANSALES & MANUFACTURING FINANCE ACCOUNTING HUMAN RESOURCESRESOURCESMARKETINGMARKETING

Discuss about systems both by level of use within business structure and within functional sub-group areas

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• Discuss about systems both by level of use within business structure and within functional sub-group areas– Different software helps different groups of users at different

levels within business hierarchy– At each hierarchical level, each of five business functional areas

have their own software types– Further, some software crosses levels or functional areas and

integrates business processes– In industry, each specialized type of software exists – Has specialists who develop, sell, implement, and maintain just

those niches– Usually, specialists are needed within each area based on

knowledge of both technology and business function

The Organisational StructureThe Organisational Structure

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Figure 2-1

Overview of Strategic Level Systems: Information Systems that Support Long-Range Planning of Senior Management.


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Strategic Level

• Strategic planning is a process of deciding on objectives of the organisation, on changes in these objectives, on the resources used to attain these objectives and on the policies that are to govern the acquisition, use and disposition of these resources.

• Strategic information is used to plan the objectives of their organisation, and to assess whether the objectives are being met in practice.

• Strategic decision-making therefore:• is medium to long term• involves high levels of uncertainty and risk • involves situations that do not necessarily recur• deals with complex issues.• Strategic information includes overall profitability, the profitability of different

segments of the business, future market prospects, total cash needs, total capital equipment needs.

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Strategic Level • Strategic information is therefore:

– Derived from both internal and external sources– Summarised at a high level– Relevant to the long term– Deals with the whole organisation (although it might

go into some detail)– Often prepared on an ‘ad hoc basis– Both quantitative and qualitative– Uncertain, given that the future cannot be predicted


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Figure 2-1

Overview of Management Level Systems: Support monitoring, controlling, decision-making, and administration by middle management.


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Management Level• Management control (or ‘tactical’ control) means ensuring that resources are

obtained and used effectively and efficiently in the accomplishment of the organisation’s objectives.

• Tactical information is used to decide how the resources of the business should be employed, and to monitor how they are being, and have been, employed.

• Such information includes productivity measurements (output per man hour or per machine hour) budgetary control or variance analysis reports, and cashflow forecasts.

• Tactical information therefore:– Is primarily generated from internal sources– Is summarised although a report might include raw data as backup– Is relevant to the short and medium term– Describes or analyses activities or departments– Is prepared routinely and regularly– Is based on quantitative measures


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Figure 2-1

Overview of Knowledge Level Systems: supports integration of new knowledge into business and control flow of paperwork. Used by knowledge and data workers.


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Figure 2-1

Overview of Operational Level Systems: Produces routine answers. Nuts and bolts of the business.

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Operational Level• Operational control decisions ensure that specific operations are carried out

effectively and efficiently. Operational control is carried out within the strictly defined guidelines issued by strategic planning and management control decisions.

• Operational information is used to ensure that specific operations are planned and carried out properly within a factory or office.

• In the payroll office, for example, operational information might include the hours worked each week by each employee, his rate of pay per hour, details of his deductions, and for the purpose of wages analysis, details of the time each person spent on individual jobs during the week.

• Operational information:– Is derived almost entirely from internal sources– Is highly detailed, being the processing of raw data– Relates to the immediate term– Is task-specific– Is prepared constantly, or very frequently– Is largely quantitative


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• Examples of types of systems at the 4 levelsExamples of types of systems at the 4 levels– Level 1-Transaction Processing Systems (TPS)Level 1-Transaction Processing Systems (TPS)– Level 2-Office Automation Systems (OAS)Level 2-Office Automation Systems (OAS)– Level 2-Knowledge Work Systems (KWS)Level 2-Knowledge Work Systems (KWS)– Level 3-Management Information Systems (MIS)Level 3-Management Information Systems (MIS)– Level 3-Decision Support Systems (DSS)Level 3-Decision Support Systems (DSS)– Level 4-Executive Support Systems (ESS)Level 4-Executive Support Systems (ESS)

• Let’s discuss each…Let’s discuss each…

Six Major Types of Systems

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Lowest Level (operational)- Transaction Processing Lowest Level (operational)- Transaction Processing Systems (TPS):Systems (TPS):

Basic business systems that serve the operational level.

• Inputs: Transactions or events• Processing: Sorting; listing; merging; updating• Outputs: Detailed reports; lists; summaries• Users: Operational personnel; supervisors

• A computerized system that performs and records daily routine transactions necessary to the conduct of the business

• Example: payroll system; production instructions


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E.g Transaction Processing Systems (TPS)E.g Transaction Processing Systems (TPS)

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Types of TPS Systems

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Level two (knowledge level)- Office Automation Systems (OAS):Level two (knowledge level)- Office Automation Systems (OAS):

• Toward a paperless office• Redesign of work flow• Integrated software• Ergonomic design• Bright, Cheerful work space

• Inputs: Documents; schedules• Processing: Document management; scheduling; communication• Outputs: Documents; schedules; mail• Users: Clerical workers

Example: MSOffice, Presentation Graphics


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Also level two (knowledge level)- Knowledge Work Systems Also level two (knowledge level)- Knowledge Work Systems (KWS)(KWS)

• Inputs: Design specs• Processing: Modeling• Outputs: Designs, graphics• Users: Technical staff. Generally certified professionals that

generate new knowledge such as engineers, scientists, and lawyers.

• Knowledge workers are not clerical workers who are often less technical and generally use, manipulate and distribute knowledge, but do not create it.

Example: Engineering work station (CAD/CAM)


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Level three (management level)- Management Information System Level three (management level)- Management Information System

(MIS):(MIS):

MIS defined before as the study of information systems in business and MIS defined before as the study of information systems in business and

management. MIS is also designates a specific category of information management. MIS is also designates a specific category of information

systems serving management-level functions.systems serving management-level functions.

The MIS may be define as a collection of disciplines, methods andprinciples existing so that the facts may be collated, analysed anddisseminated in such a manner that assistance is rendered tomanagement in the attainment of corporate objectives.

Inputs: Summary transaction data• Processing: Simple models; low level analysis• Outputs: Summary reports• Users: Middle managersExample: Weekly, monthly, and annual resource allocation. Not five year plans and not

daily details, but something in between.


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Level three (management level)- Management Information System Level three (management level)- Management Information System

(MIS):(MIS):• Some characteristics of MIS that make them differ from DSS (on

next slides)– Structured and semi-structured decisions– Output is often the kind that you need routinely each term

(quarter, month, year) to evaluate how to proceed next (quarterly sales data for past 5 years)

– Generally, you can “eyeball” your decision


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MISMIS

MIS FILESMIS FILES

SALES DATA

UNIT PRODUCT COST

PRODUCT CHANGE DATA

EXPENSE DATA

MISREPORTS

MANAGERSMANAGERS

TPSTPS

Order Processing

System

Materials Resource

Planning System

General Ledger

System

ORDER FILEORDER FILE

PRODUCTION MASTER FILEPRODUCTION MASTER FILE

ACCOUNTING FILESACCOUNTING FILES

TPS DATA FOR MIS APPLICATIONS

3 TPS supply summarised transaction data at the end of the time period to the MIS reporting system. Managers gain access to the organisational data through the MIS,which provides them with the appropriate reports


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Also level three (management level)- Decision Support System (DSS):Also level three (management level)- Decision Support System (DSS):• Decision support systems (DSS) are a form of management information

system. Decision support systems are used by management to assist in making unstructured decisions on issues do not allow the easy application of many of the techniques or systems developed for more well defined problems or activities.

• Decision support systems are intended to provide a wide range of alternative information gathering and analytical tools with a major emphasis upon flexibility and user-friendliness.

• Inputs: databases optimized for statistical analysis• Processing: Interactive. Simulations and statistical analysis• Outputs: Responses to queries; statistical test results.• Users: Professionals, staff • Example: Could answer the following query:

“We need to trim 5% of our menu offerings to limit complexity in operations. Which items are the worst performing; are most likely to lead to sales of other products left on the menu, and have the most ingredients unique to their recipes?”


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DECISION SUPPORT SYSTEM (DSS)

This DSS operates on a powerful PC. Used daily by managers who must develop bids on shipping contracts


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Top level (strategic level)-Executive Support System ESS):Top level (strategic level)-Executive Support System ESS):

An ESS provides the executive with the underlying performance facts and figures which have traditionally been under the control of middle managers. It is a type of DSS, and takes the form of computer workstations on top of executives’ desks.

• Inputs: Aggregate data. Internal and external• Processing: Interactive and graphical simulations• Outputs: Projections• Users: Senior managers

Example: 5-year operating plan. Answer question like “what are long-term industry cost trends and how are we doing relative to them?”

• Gets data from all internal IS plus external industry data bases


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Characteristics of Executive Support Systems (ESS)

• Top level management

• Designed to the individual

• Ties CEO to all levels

• Very expensive to keep up

• Extensive support staff


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EXECUTIVE SUPPORT SYSTEMS (ESS)

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

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Figure 2-9

INTERRELATIONSHIPS: INTERRELATIONSHIPS: -TPS generally feed all other systems- KWS and OAS are generally loosely coupled with others- MIS generally indicate when a DSS is needed and provide input for them to crunch- ESS take all internal data but usually only summary data from MIS and DSS level

Output data from one is input data for others to process


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Enterprise Applications

• Enterprise systems or ERP• Supply Chain Management• Customer Relationship Management• Knowledge Management

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Enterprise systems or Enterprise Resource Planning (ERP)• Provides a single information system for organisation-wide

coordination of key business processes• Models and automates many business processes, such as filling an

order, scheduling a shipment• Goal: Intergrate information across the company and eliminate

complex, expensive links between computer systems in different areas of the business.

Think about the benefits and challenges of an Enterprise System… ??


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Supply Chain Management - SCM• Focus on helping the firm manage its relationship with suppliers• Links suppliers, manufacturing plants, distribution centres, retail outlets, people, and

information through processes such as procurement, inventory control, distribution, and delivery to supply goods and services from source through consumption

Bullwhip effect – information about the dd for a product gets distorted as it passes from one entity to the next across the supply chain(stockpile inventory so each has enough “just in case”)

Supply Chain Planning (e.g Forecasts) & Supply Chain Execution(e.g executed & delivered to right location in most effective manner)

E.g JDEs SCM software includes capability for production scheduling – Calculate qty to meet dd and also send alerts to suppliers when inventory is running too low.

Collaborative commerce : Use of digital technologies to enable multiple organisations to collaboratively design, develop, build, move and manage products through their life cycle


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Customer Relationship Management - CRM• Customers – viewed as long term assets • CRM – Focus on Managing all the ways that a firm deals with its existing and

potential new customers.• The ideal CRM provides end-to-end customer care from receipt of an order

through product delivery

• Collects data from multiple sources and provide analytical tools for answering questions:– What is the value of a customer to a firm over his/her lifetime?– Most loyal/ profitable customers?– What do these profitable customers want to buy?

• Use these answers – To acquire new customer– Provide better service and support– Customise their offerings more precisely to customer preferences – & provide on-going value to retain profitable customers.


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Knowledge Management Systems - KMS• Some firms do better than other because they have better

KNOWLEDGE about how to create, produce, and deliver products and services.

• KMS – collect all relevant knowledge and experience in the firm and make it available whenever and wherever needed to support business processes and management decisions.

• Also link the firm to external sources of knowledge.

• E.g of knowledge systems –– Office systems for distribution of knowledge and information– Knowledge work systems to facilitate knowledge creation

• KMS – also include tools for knowledge discovery that enable the organisation to recognise patterns and important relationships in large pools of data
