INFORMATION SYSTEMS IN THE ENTERPRISE Chapter 2 (9E)

What Are Information Systems? An information system (IS) is a set of interrelated components working together to (1) facilitate operational functions and (2) support management decision making by producing information that enables managers to plan and control. –Components include hardware, software, data, people, and procedures An (IS) is an organizational and management solution based on information technology to a challenge posed by the environment Information technology (IT) includes computer hardware, software, storage technologies, and telecommunications/networks

Basic Functions of Information Systems Information systems are models of physical systems Information systems engage in four basic activities in order to support operations and management decision making –Input –Processing –Output Feedback for operations and decision making Feedback on the performance of IS –Storage

Transaction Processing Systems (TPS)Transaction Processing Systems (TPS) Management Information Systems (MIS)Management Information Systems (MIS) Decision Support Systems (DSS)Decision Support Systems (DSS) Executive Support Systems (ESS)Executive Support Systems (ESS) MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Ways to Organize Information Systems By the groups they serve –Operational level –Management level –Strategic level By functional area –Sales and marketing –Manufacturing and production –Finance and accounting –Human resources

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS The Four Major Types of Information Systems Figure 2-2

Transaction Processing Systems (TPS) Basic business systems that serve the operational levelBasic business systems that serve the operational level A computerized system that facilitates daily routine transactions necessary to the conduct of the business and captures and stores data associated with the transactionA computerized system that facilitates daily routine transactions necessary to the conduct of the business and captures and stores data associated with the transaction

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS A Symbolic Representation for a Payroll TPS Figure 2-3

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Typical Applications of TPS Figure 2-4

Management Information System (MIS) MIS serve the management level of the organization, providing managers with reports and online access to the organization’s current performance and historical records. Inputs: High-volume data Processing: Simple models Outputs: Summary reports Users: Middle managers Example: Annual budgeting

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Management Information Systems (MIS) (continued) Figure 2-5

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Management Information Systems (MIS) (continued) Figure 2-6 A sample MIS report

Structured and semi-structured decisions Report control oriented Past and present data Internal orientation Lengthy design process Characteristics of Management Information System (MIS)

Decision Support System (DSS) DSS serve the management level and help managers make decision that are unique, rapidly changing, and not easily specified in advance (use of mathematical models) Inputs: Low-volume data Processing: Interactive (e.g., what-if analysis), data-mining, OLAP Outputs: Decision analysis Users: Professionals, staff Example: Contract cost analysis

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Decision-Support Systems (DSS) (Continued) Voyage-estimating decision-support system Figure 2-7

Executive Support System (ESS) ESS support strategic level managers to help make decisions that are non-routine requiring judgment, evaluation, and insight. 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 Executive Support System (ESS)

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Model of a Typical Executive Support System Figure 2-8

Interrelationships Among Systems TPS are typically a major source of data for other systems MIS are sources for DSS and ESS DSS is a source for ESS Sometimes a single system serves many purposes In contemporary digital firms, the different types of systems are closely linked to one another. This is the ideal. In traditional firms these systems tend to be isolated from one another, and information does not flow seamlessly from one end of the organization to the other. Efficiency and business value tend to suffer greatly in these traditional firms.

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Relationship of Systems to One Another Interrelationships among systems Figure 2-9

Organizing Systems by Functional Area Sales and marketing Manufacturing and production Finance and accounting Human resources

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Sales and Marketing Systems Major functions of systems: Sales management, market research, promotion, pricing, new products Major application systems: Sales order info system, market research system, pricing system

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Sales and Marketing Systems SYSTEMDESCRIPTIONORGANIZATIONAL LEVEL Order processing Enter, process, and track ordersOperational Pricing analysisDetermine prices for products and services Management Sales trend forecasting Prepare 5-year sales forecastsStrategic Table 2-2

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Manufacturing and Production Systems Major functions of systems: Scheduling, purchasing, shipping, receiving, engineering, operations Major application systems: Materials resource planning systems, purchase order control systems, engineering systems, quality control systems

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE SYSTEMDESCRIPTIONORGANIZATIONAL LEVEL Machine control Control the actions of machines and equipment Operational Production planning Decide when and how many products should be produced Management Facilities location Decide where to locate new production facilities Strategic Manufacturing and Production Systems

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Overview of an Inventory System Figure 2-10 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Financing and Accounting Systems Major functions of systems: Budgeting, general ledger, billing, cost accountingBudgeting, general ledger, billing, cost accounting Major application systems: General ledger, accounts receivable, accounts payable, budgeting, funds management systemsGeneral ledger, accounts receivable, accounts payable, budgeting, funds management systems

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Financing & Accounting Systems (Continued) SYSTEMDESCRIPTIONORGANIZATION- AL LEVEL Accounts receivable Tracks money owed the firmOperational BudgetingPrepares short-term budgetsManagement Profit planning Plans long-term profitsStrategic Table 2-4

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Human Resource Systems Major functions of systems: Personnel records, benefits, compensation, labor relations, trainingPersonnel records, benefits, compensation, labor relations, training Major application systems: Payroll, employee records, benefit systems, career path systems, personnel training systemsPayroll, employee records, benefit systems, career path systems, personnel training systems

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Human Resource Systems (Continued) SYSTEMDESCRIPTIONORGANIZATIONAL LEVEL Training and development Tracks employee training, skills, and performance appraisals Operational Compensation analysis Monitors the range and distribution of employee wages, salaries, and benefits Management Human resources planning Plans the long-term labor force needs of the organization Strategic Table 2-5

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Human Resource Systems (Continued) An Employee Recordkeeping System Figure 2-11 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Organizational Challenges E-commerce, e-business, and global competition force companies to bring products to market faster, improve customer service, and execute processes more efficiently. These objectives require integrated information from different functional areas, levels of management, and coordination with business partners (e.g., customers and suppliers). Solution –Enterprise applications that coordinate, activities, and knowledge across intra- and inter- firm boundaries –Interorganizational systems that automate information flows across organizational boundaries (an inter-firm system)

Business Processes Environmental factors and enterprise applications have forced businesses to examine their processes. –Manner in which work is organized, coordinated, and focused to produce a valuable product or service –Concrete work flows of material, information, and knowledge—sets of activities Information systems help organizations –Achieve great efficiencies by automating parts of processes –Rethink and streamline processes

Manufacturing and production: Assembling product, checking quality, producing bills of materials Sales and marketing: Identifying customers, creating customer awareness, selling Finance and accounting: Paying creditors, creating financial statements, managing cash accounts Human Resources: Hiring employees, evaluating performance, enrolling employees in benefits plans Examples of Business Processes

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Business Processes and Information Systems Cross-Functional Business Processes: Transcend boundary between sales, marketing, manufacturing, and research and developmentTranscend boundary between sales, marketing, manufacturing, and research and development Group employees from different functional specialties to a complete piece of workGroup employees from different functional specialties to a complete piece of work Example: Order Fulfillment Process INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise The Order Fulfillment Process Figure 2-12 INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Interpretation of the Previous Slide An enterprise system collects data from key business processes and places the data in a central repository (firm wide database). Managers have (a) more precise and timely information for coordinating (a) operations and (b) a firm wide view of business processes and information.

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Systems for Enterprise-Wide Process Integration Enterprise applications: Designed to support organization-wide process coordination and integrationDesigned to support organization-wide process coordination and integration INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Consist of Consist of : Enterprise systems Supply chain management systems (also an IOS) Customer relationship management systems (also an IOS sometimes) Knowledge management systems Chapter 11 will cover these in more detail Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Systems for Enterprise-Wide Process Integration (Continued) INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Enterprise Systems Enterprise systems, also known as enterprise resource planning (ERP) systems, provide a single information system for organization-wide coordination and integration of key business processes.Enterprise systems, also known as enterprise resource planning (ERP) systems, provide a single information system for organization-wide coordination and integration of key business processes. Information that was previously fragmented in different systems can seamlessly flow throughout the firm so that it can be shared by business processes in manufacturing, accounting, human resources, and other areas.Information that was previously fragmented in different systems can seamlessly flow throughout the firm so that it can be shared by business processes in manufacturing, accounting, human resources, and other areas. INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Enterprise Application Architecture Figure 2-13 INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Traditional “Silo” View of Information Systems Within the business: There are functions, each having its uses of information systemsThere are functions, each having its uses of information systems Outside the organization’s boundaries: There are customers and vendorsThere are customers and vendors Functions tend to work in isolation INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Traditional View of Systems Figure 2-14 INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Enterprise Systems Figure 2-15 INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Pros and Cons of Enterprise Applications Pros Firm structure and organization: One organization Management: Firm-wide knowledge-based management processes Technology: Unified platform Business: More efficient operations and customer- driven business processes Cons Difficult to build: Require fundamental changes in the way the business operates Technology: Require complex pieces of software and large investments of time, money, and expertise Centralized organizational coordination and decision making: Not the best way for the firms to operate

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise There are extraordinary opportunities to use information systems to achieve business value, and increase profitabilityThere are extraordinary opportunities to use information systems to achieve business value, and increase profitability MANAGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS Management Opportunities:

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Integration and the whole firm view: Given the different interests and perspectives within a firm, it is difficult to achieve consensus about the need for the "whole firm" viewpoint.Integration and the whole firm view: Given the different interests and perspectives within a firm, it is difficult to achieve consensus about the need for the "whole firm" viewpoint. Management and employee training: Training a large number of employees on many systems in a large organization involves commensurately large investments.Management and employee training: Training a large number of employees on many systems in a large organization involves commensurately large investments. MANAGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS Management Challenges:

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise Accounting for the cost of systems and managing demands for systems: Given the large number of different types of systems in a firm, and the large number of people involved with using them, it is a complex task to understand which systems are truly necessary and productive with high returns on investmentAccounting for the cost of systems and managing demands for systems: Given the large number of different types of systems in a firm, and the large number of people involved with using them, it is a complex task to understand which systems are truly necessary and productive with high returns on investment MANAGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS Management Challenges: (Continued)

Management Information Systems Management Information Systems Chapter 2 Information Systems in the Enterprise MANAGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS Solution Guidelines: Inventory the firm’s information systems: Develop a list of firm-wide information requirements to give a 360-degree view of the most important information needs of the firm.Inventory the firm’s information systems: Develop a list of firm-wide information requirements to give a 360-degree view of the most important information needs of the firm. Employee and management education: Ensure that you understand how much training is required.Employee and management education: Ensure that you understand how much training is required. Account for the costs and benefits: Develop an accounting system for information services firm- wide.Account for the costs and benefits: Develop an accounting system for information services firm- wide.

Web Sites With DSS or ESS Products Examples of DSS software – o.dsb?Overviewhttp:// o.dsb?Overview – Req&solId=55459&pos=1&spId=INFORMATICADECISIONSUP POR&trkpg=scnamehttp:// Req&solId=55459&pos=1&spId=INFORMATICADECISIONSUP POR&trkpg=scname – Examples of ESS – – SS.htmhttp:// SS.htm –