Information Systems – Week 2 Last week – Introduction What is an Information System? Why use Information Systems? Reading and Preparation for Case studies This week Discussion of Assignment – any teams yet? Strategic Role of Information Systems Types of system and how they fit in Case Studies

Strategic Role “Understanding Information Technology (IT) is vital to every manager simply because IT is part of every manager's job. Managers in the 1990s must use IT to leverage their contributions to the organisation, and they must be knowledgeable about IT so that they can lead others to do the same.” Professor Richard L. Nolan, Harvard Business School

Strategic Role of Information Systems Strategic Information System Can Change: Goals, Operations Products, Services Environment To Gain Competitive Advantage

Changing Concepts of IS Time period Conception of information Information system Purpose 1950-1960 Bureaucratic requirement Electronic Accounting Speed accounting & Paper processing 1960s-1970s General purpose support MIS Speed general Reporting requirements 1970s-1980s Customized management support DSS - ESS Improve, customize Decision making 1985-now Strategic resource Strategic system Promote survival and prosperity of organization Competitive advantage Business foundation

Business-level Strategy Product Differentiation Focused Differentiation Data-mining Supply Chain Management Efficient Customer Response Enhancing Core Competencies

Strategy Levels & IT Strategies Models IT technologies Industry Firm Cooperation vs competition Licensing Standards Firm Synergy Core competencies Business Low cost Differentiation Scope Competitive forces model Network economies Core competency Value chain analysis Electronic transactions Communications networks Interorganizational systems Information partnerships Knowledge systems Organizational systems Datamining It-based products / services Supply chain management Efficient customer response

Competitive Forces Model NEW MARKET ENTRANTS SUBSTITUTE PRODUCTS & SERVICES TRADITIONAL COMPETITION THE FIRM SUPPLIERS CUSTOMERS

Countering Competitive Forces Product differentiation Focused differentiation Link customers & suppliers Low-cost producer Use the Internet!

Countering Competitive Forces Product Differentiation Focused Differentiation Links to Customers and Suppliers Low-cost Producer Low-cost Vendor RBC Centura Hyatt Hotels TravelWeb Federal Express AVEX Electronics E-Buyer

Types of Information System DATA WORKERS KIND OF SYSTEM GROUPS SERVED STRATEGIC LEVEL SENIOR MANAGERS MANAGEMENT LEVEL MIDDLE MANAGERS OPERATIONAL OPERATIONAL LEVEL MANAGERS KNOWLEDGE LEVEL KNOWLEDGE & SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN RESOURCES MARKETING

Major Types Of Systems Executive Support Systems (ESS) Management Information Systems (MIS) Decision Support Systems (DSS) Knowledge Work Systems (KWS) Office Automation Systems (OAS) Transaction Processing Systems (TPS or OLTP)

Transaction Processing Systems (TPS) Operational Level Inputs: Transactions, Events Processing: Updating Outputs: Detailed Reports Users: Operations Personnel Example: Accounts Payable The following examples are taken from Laudon & Laudon TPS

Typical TPS Applications Sales & Marketing Systems Major System Functions: Sales Management Market Research Promotion Pricing New Products Major System Applications: Sales Order Info System Market Research System Pricing System TPS

Manufacturing & Production Systems Major System Applications: Materials Resource Planning Systems Purchase Order Control Engineering Systems Quality Control Major System Functions: Scheduling Purchasing Shipping/Receiving Engineering Operations TPS

Finance & Accounting Systems Major System Functions: Budgeting General Ledger Billing Cost Accounting Major System Applications: General Ledger Accounts Receivable/Payable Budgeting Funds Management TPS

Human Resource Systems Major System Functions: Personnel Records Benefits Compensation Labour Relations Training Major System Applications: Payroll Employee Records Benefit Systems Career Path Systems Personnel Training Systems TPS

Others – e.g. University TPS Major System Functions: Admissions Grade Records Course Records Time-tabling Alumni relations Major System Applications: Registration System Student Transcript System Curriculum Class Control Scheduling Alumni Benefactor System TPS

Knowledge Work Systems (KWS) KNOWLEDGE LEVEL Inputs: Design Specs Processing: Modelling Outputs: Designs, Graphics Users: Technical Staff EXAMPLE: ENGINEERING WORK STATION

Office Automation Systems (OAS) Toward A “Paperless” Office Redesign Of Work Flow Integrated Software Ergonomic Design Bright, Cheerful Work Space EXAMPLE: PRESENTATION GRAPHICS

Management Information Systems (MIS) MANAGEMENT LEVEL Inputs: High Volume Data Processing: Simple Models Outputs: Summary Reports Users: Middle Managers EXAMPLE: ANNUAL BUDGETING

Management Information Systems (MIS) Structured & Semi-structured Decisions Report Control Oriented Past & Present Data Internal Orientation Lengthy Design Process

TPS Data for MIS Applications Order Processing System Materials Resource Planning System General Ledger ORDER FILE PRODUCTION MASTER FILE ACCOUNTING FILES MIS SALES DATA UNIT PRODUCT COST PRODUCT CHANGE DATA EXPENSE DATA MIS REPORTS MANAGERS MIS FILES Source: Laudon & Laudon

Decision Support Systems (DSS) MANAGEMENT LEVEL Inputs: Low Volume Data Processing: Interactive Outputs: Decision Analysis Users: Professionals, Staff EXAMPLE: CONTRACT COST ANALYSIS

Decision Support Systems (DSS) Flexible, Adaptable, Quick User Controls Inputs/outputs No Professional Programming Supports Decision Process Sophisticated Modeling Tools

Executive Support Systems (ESS) STRATEGIC LEVEL Inputs: Aggregate Data Processing: Interactive Outputs: Projections Users: Senior Managers EXAMPLE: 5 YEAR OPERATING PLAN TOP LEVEL MANAGEMENT Designed to the Individual Ties CEO to All Levels Very Expensive to Keep Up Extensive Support Staff

Interrelationships Among Systems ESS DSS MIS KWS OAS TPS

Goodsell Estate Agents Problems identified: Sales slipping Rapid staff turnover Not working as a team What can be done? Analysis of missed sales Are we not showing customers what they want? Is it lack of expertise from rapid turnover? How can we share information among the team? Could improve morale and cut attrition

Zilkha Exploration A new approach to oil exploration Virtual company with low overheads Purchased oil exploration data, not leases Hired expert geologists to analyse mass of data Analysed data using latest computer technology Then bought leases and contracted other to drill Had twice the hit rate for new oil fields than conventional exploration procedures Zilkha was bought out for a billion dollars in 1998 http://www.zilkha.com/zilkhaenergy/ http://www.zilkha.com/

Marks & Spencer Case Study on pp.97-98 of Laudon & Laudon Edn.6 Greenbury has since left What Information Systems solution could you apply to assist M & S? Operational systems are pretty good What other IS models could be applied to the infrastructure? Need to support decision making at all levels How can M & S get to know its customers better?