Lecture-2- The Strategic Role of Information Systems

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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

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LEARNING OBJECTIVES

• Explain how systems & networks

create new efficiencies

• Evaluate benefits & limitations of • Evaluate benefits & limitations of

systems & networks

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MANAGEMENT CHALLENGES

• Key system applications

• Functional perspective of systems

• Integrating functions & processes• Integrating functions & processes

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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

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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

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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

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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

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OFFICE AUTOMATION SYSTEMS (OAS)

• Toward a “paperless” office

• Redesign of work flow

• Integrated software• Integrated software

• Ergonomic design

• Bright, cheerful work spaceEXAMPLE: PRESENTATION GRAPHICS

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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

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DECISION SUPPORT SYSTEMS (DSS)

• Flexible, adaptable, quick

• User controls inputs/outputs

• No professional programming• No professional programming

• Supports decision process

• Sophisticated modeling tools

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EXECUTIVE SUPPORT SYSTEMS (ESS)

STRATEGIC LEVEL

• Inputs: aggregate data

• Processing: interactive• Processing: interactive

• Outputs: projections

• Users: senior managers

EXAMPLE: 5 YEAR OPERATING PLAN

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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

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INTERRELATIONSHIPS AMONG SYSTEMS

ESS

DSSMIS

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TPSKWS

OAS

DSSMIS

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

• Sales & marketing systems

• Manufacturing & production

systemssystems

• Finance & accounting systems

• Human resources systems

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SALES & MARKETING INFORMATION SYSTEM

SALES

SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

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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

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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

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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

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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

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SUPPLY-CHAIN MANAGEMENT

PLANNING & PLANNING & FORECASTINGFORECASTING

ORDER ORDER PROCESSINGPROCESSING

PROCUREMENTPROCUREMENT

ACCOUNTINGACCOUNTING

SUPPLIERSSUPPLIERSCUSTOMERSCUSTOMERS

INTRANETINTRANETINTRANET

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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

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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

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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

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CHALLENGES OF ENTERPRISE SYSTEMS

• Daunting implementation

• High up front costs & future

benefitsbenefits

• Inflexibility

• Hard to realize strategic value

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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

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Emerging information system trends in

organisations

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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.

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ENTERPRISE SYSTEM

AccountingManufacturing

Business ProcessesBusiness Processes

EnterpriseEnterprise --wide wide Vendors Customers

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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”

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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.

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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.

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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

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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

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• 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.

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• 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.

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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.

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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)

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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

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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

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The Dimensions of E-Commerce

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Benefits of ecommerce

• Discuss the benefits to

• Business

• Customer

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