1. Organisational Information Systems
Lecture 2
Organisational Information Systems
(Unit 2)

2. Different ways in which information can create value for organisations:
Add value
Customers and markets
Organisation A
Organisation B
Reduce cost
Manage risks
Market, financial, legal, operational
Transactions and processes
See Chaffey & Wood page 17, Figure 1.3
shows how the strategic importance of business information management in an organisation can be assessed. According to the authors the analytical tool given in the figure was devised by Prof. Don Marchand and shows different ways in which information can create value for an organisation. The use of information by organisations on each axis can be assessed from low to high.
Value is added through providing better quality products and services. Information can be used to better understand customer characteristics and needs and their level of satisfaction with services. Information is also used to sense and respond to markets. Information about trends in demands, competitor products and activities must be monitored so that organisations can develop strategies to compete in the market.
Cost reduction is achieved by making the processes more efficient. Efficiency is achieved through using information to create, market and deliver services using fewer resources. Technology is applied to reduce the paper work, reduce the human resources needed through automation, and by improving internal and external communication. E.g. providing web-services.
Information is used for risk management in organisations. Marchand notes how risk management in turn has created functions such as finance, auditing, and corporate performance management.
Marchand uses the term ‘new reality’ to refer to how information can be used to innovate, to create new ways in which products and services can be developed.
Traditionally organisations have mainly used information for risk management and reducing cost (Organisation A). IT has ease these activities. IT has also given opportunities to create value – Organisation B. organisation C has a balanced approach to using information. All organisations use a combination of these approaches. Depending on the complexity of the organisation, it may not be appropriate for every organisation to occupy the position taken by Org. C. However, organisations can use this to assess opportunities for improved use of information.
Organisation C
New products, new services, new business ideas
Create new reality
(Chaffey and Wood, 2005)

3. Operations Support Systems Management Support Systems
Information Systems
Support of business operations
Support of managerial decision making
Operations Support Systems
Management Support Systems
Transaction Processing Systems
Process Control Systems
Enterprise Collaboration Systems
Processing business transactions
Control of industrial processes
Team and work group collaboration
Management Information Systems
Decision Support Systems
Executive Information Systems
Pre-specified reporting for managers
Interactive decision support
Information tailored for executives
Operations and management classification of information systems (James A O’Brien (2004), ‘Management Information Systems, Managing information technology in the business enterprise’, 6th Edition, McGraw-Hill Irwin).

4. Advances in IT and telecommunications
Globalisation
Digital firms
Globalisation can be defined as, intensification of world-wide social relationships which link distant localities in such a way that local happenings are shaped by distant events and, in turn, distant events are shaped by local happenings.
A virtual company is one that: joins with another company operationally, but not physically, to design and manufacture a product; distributed geographically and whose work is coordinated through electronic communications; share skills, costs, and access to one another’s markets.
A digital firm can be defined along several dimensions. A digital firm is one in which nearly all organisation’s significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. Core business processes are accomplished through digital networks spanning entire organisation or linking multiple organisations (Laudon and laudon, 2007:7).
Virtual enterprise

5. Globalisation
“..the increasing integration of economies around the world, particularly through trade and financial flows. .. the movement of people (labour) and knowledge (technology) across international borders.”
Globalisation can be defined as, intensification of world-wide social relationships which link distant localities in such a way that local happenings are shaped by distant events and, in turn, distant events are shaped by local happenings.
A virtual company is one that: joins with another company operationally, but not physically, to design and manufacture a product; distributed geographically and whose work is coordinated through electronic communications; share skills, costs, and access to one another’s markets.
A digital can be defined along several dimensions. A digital firm is one in which nearly all organisation’s significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. Core business processes are accomplished through digital networks spanning entire organisation or linking multiple organisations (Laudon and laudon, 2007:7).
(The IMF Staff (2002) at www,imf.org/external/np/exr/ib/2000/ htm)

6. Virtual enterprise
A company that: joins with another company operationally, but not physically, to design and manufacture a product; distributed geographically and whose work is coordinated through electronic communications; share skills, costs, and access to one another’s markets
Globalisation can be defined as, intensification of world-wide social relationships which link distant localities in such a way that local happenings are shaped by distant events and, in turn, distant events are shaped by local happenings.
A virtual company is one that: joins with another company operationally, but not physically, to design and manufacture a product; distributed geographically and whose work is coordinated through electronic communications; share skills, costs, and access to one another’s markets.
A digital can be defined along several dimensions. A digital firm is one in which nearly all organisation’s significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. Core business processes are accomplished through digital networks spanning entire organisation or linking multiple organisations (Laudon and laudon, 2007:7).

7. Digital firms
A firm in which nearly all organisation’s significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. Core business processes are accomplished through digital networks
Globalisation can be defined as, intensification of world-wide social relationships which link distant localities in such a way that local happenings are shaped by distant events and, in turn, distant events are shaped by local happenings.
A virtual company is one that: joins with another company operationally, but not physically, to design and manufacture a product; distributed geographically and whose work is coordinated through electronic communications; share skills, costs, and access to one another’s markets.
A digital can be defined along several dimensions. A digital firm is one in which nearly all organisation’s significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. Core business processes are accomplished through digital networks spanning entire organisation or linking multiple organisations (Laudon and laudon, 2007:7).

8. Digital Firms
sense and respond to their environments more rapidly than traditional firms
offer extraordinary opportunities for more flexible global organisation and management.
time shifting and space shifting are the norms
From Laudon and Laudon, 2007:7
Digital firms (DFs) sense and respond to their environments more rapidly than traditional firms, giving them more flexibility to survive in turbulent times. DFs offer extraordinary opportunities for more flexible global organisation and management.
In DFs both time shifting and space shifting are the norms. Time shifting refers to business being conducted 24x7, rather than narrow work day time bands of 9-5. Space shifting means that work take place in a global workshop, as well as within national boundaries. Work is accomplished physically wherever in the world it is best accomplished.

9. The Emerging Digital Firm Customers Factories
Online marketing
Online sales
Built-to-order products
Customer service
Sales force automation
Just-in-time production
Continuous inventory replenishment
Production planning
Remote offices and work groups
Laudon & Laudon, 9th Edition, 2006:12
The figure illustrates a digital firm making intensive use of Internet and digital technology for electronic business. Information can flow seamlessly among different parts of the company and between the company and external entities such as customers, suppliers, and business partners. Companies can use Internet technology for e-commerce transactions with customers and suppliers, for managing internal processes, and for coordinating with suppliers and other business partners. E-business includes e-commerce as well as the management and coordination of the enterprise.
Communicate plans and policies
Group collaboration
Electronic communication
Scheduling
Suppliers
Business partners
Procurement
Supply chain management
Joint design
outsourcing
(Laudon & Laudon, 9th Edition, 2006:12)

10. Exercise
Laudon and Laudon, 10th Edition: Read the case study on Accenture in Chapter 1, page 9 and do the exercises at the end. OR
Laudon and Laudon, 9th Edition: Read the case study on CEMEX in Chapter 1, page 14, and do the exercises at the end.

11. Characteristics of organisational problems and solutions
The rational model
Bounded-rationality
Satisficing
Optimising
Solution
Problem
We know that information is vital to support decisions. But how does this process happen? This is the realm of decision-making theory and should underpin approaches to information management. Although managers make decisions every day in different situations, decision making is not a mechanical process. Research has shown that we use both logic and intuition to make the best decision. Some people favour a more systematic approach while others take an intuitive approach.
Structured problems are: well understood, repetitive, routine, have a definite procedure for handling them or can be addressed by standard operating procedures or “rules of thumb.” The information requirements for such decisions are clear and known. e.g. pricing customer orders, reordering supplies, setting wage rates for employees.
Unstructured problems: The decision environment is uncertain, complex, and unstable. The decision maker must provide judgement, evaluation, and insight into the problem definition. There is no agreed upon or well understood procedure for making such decisions. The information requirements for these decisions are not clear. Each of these decisions are novel, and non-routine.
structured
unstructured
Semi-structured

13. Decision Dimensions in an Organisation
Stair and Reynolds
High
Strategic management
Tactical management
Operational management
Impact on reaching corporate goals
Decision making authority
Problem uniqueness
Need for external data
Number of people and functions affected by decision
Planning horizon
Low

14. Decision Support Systems
A set of interactive software programs that provide managers with data, tools, and models to make semistructured and unstructured decisions.

15. DSS support management decision making by integrating:
Company performance data
Business rules based on decision tables
Analytical tools and models for forecasting and planning

16. Internal and External databases
The structure of DSS
Model Management
Dialog Management
Knowledge Management
User
Data Management
DSS
Internal and External databases
(Information Systems, Zwass, p57)

17. Decision Models Statistical Models Financial and Accounting Models
Summary statistics, trend projections, hypothesis testing, etc.
Statistical Models
Financial and Accounting Models
Production Models
Marketing Models
Human Resource Models
Cash flow, internal rate of return, other investment analysis

18. Examples of Model driven DSS
Voyage estimating system (Laudon & Laudon, Chapter 2, pages 54-57
More examples in Laudon & Laudon, Chapter 12,

19. 1 2 request Cargo reservation system Cargo booking agent
Confirm/reject
Availability/ minimum price
Cargo size, rate data
CargoProf revenue management system
Flight schedule server
Cargo availability forecast
Continental Airlines Inc.’s system for cargo revenue optimisation. CA’s cargo division developed a software application called CargoProf to maximise revenue from its aircraft freight compartments. It’s a customise package from Manugistics to ensure that the company sells all available freight space on its carriers at the most profitable price. The system forecasts cargo capacity and sets an optimal value each night for what they need.
Passenger reservation system
Passenger booking agent
Passenger forecast data
(Laudon & Laudon, 8th ed., page 351)

20. Data driven DSS
Make use of OLAP and data mining to extract useful information.
With OLAP uses need to have a good idea of what information they are looking for.
OLAP allows data to be viewed from different perspectives, i.e. the same data is viewed in different ways using multiple dimensions.
Make use of OLAP and data mining to extract useful information. Data gathered from their websites and enterprise information systems are collected in data warehouses. With OLAP uses need to have a good idea of what information they are looking for. Allows data to be viewed from different perspectives, i.e. the same data is viewed in different ways using multiple dimensions.

21. Data driven DSS Data mining is more discovery driven.
Finds hidden patterns and relationships.
Data mining can yield associations, sequences, classifications, clusters, and forecasts.
Data mining is more discovery driven. It provides insights into corporate data which cannot be provided with OLAP by finding hidden patterns and relationships in large databases and inferring rules from them to predict future behaviour. Datamining can yield associations, sequences, classifications, clusters, and forecasts. Datamining is an important part of knowledge discovery.

22. Types of Analytical Modelling
What-if Analysis
Change selected variables and observe its effect on other variables
Sensitivity Analysis
Observe how repeated changes to one variable affect other variables
Goal-seeking Analysis (how-can)
Make repeated changes to selected variables until a chosen variable reach a target value
Optimisation Analysis
Finding an optimum value for selected variables, under a set of given constraints
What-if Analysis – for example if you are using a spreadsheet, you can change the revenue, or a tax formula then recalculate all affected variables. Then you can observe and evaluate the changes occurred, say for example to net profit after taxes. If we cut promotional expenses by 10% what would be the affect on sales?
Sensitivity Analysis – a special case of what-if analysis where only one variable is changed at a time. The chosen variable is changed repeatedly observing its affect on other variables. Usually used when the decision maker is not certain about the estimation made about a particular key variable. For example, taking the same example as before, we can change the revenue by small amounts and see the effect on other variables showing how various revenue levels affect other factors in the organisation.
Goal-seeking Analysis – also known as ‘how can’ analysis. This is the reverse process of the former two. See how a target value can be achieved by various combinations of other variables. Say for a particular business venture you want to achieve a target of net profit after taxes of £2 million. So you change the revenue and total expenses to achieve that. Then in order to keep the total expenses at the required level you can see where you can cut expenses.
Optimisation Analysis – a more complex version of goal seeking analysis. The aim is to find the optimum value for one or more variables under certain conditions. For example, try to find out the highest possible profit that could be earned by varying the values for selected revenue sources and expense categories. There can be in this case limitation to the production capacity and available financing. Usually available in advanced DSS packages.

23. Group Decision Support Systems (GDSS)
Computer-based systems that enhance group decision making and improve the flow of information among group members.

24. GDSS Alternatives
[Figure 10.14]
Stair & Raynolds

25. Decision Room Decision room alternative
Decision makers are located in the same building or geographic area.
Decision makers are occasional users of the GDSS approach.
Stair & Raynolds

26. Local Decision network
Schultheis & Sumner

27. GDSS Alternatives Teleconferencing alternative
-Location of group members is distant.
-Decision frequency is low.
-Group meetings at different locations are tied together

28. Teleconferencing chairs terminals table video cameras public screen
Schultheis & Sumner
Robert Schulthesis and Mary Sumner

29. Wide area decision network
Location of group members is geographically remote.
Decision frequency is high.
Virtual workgroups
Groups of workers located around the world working on common problems via a GDSS
Stair & Raynolds

30. The Executive Support System

31. The Executive Support System (ESS)
An IS that is focused on meeting the strategic needs of the organisation
Designed explicitly for the purposes of senior management
Used by senior management without technical intermediaries Easy to use, easy to learn

32. Also known as an Executive Information System (EIS)
Use state-of-the-art integrated graphics, text, and communication technology
Web browsing, , groupware tools, DSS and Expert System capabilities
Also known as an Executive Information System (EIS)
An ESS may also include a communication link for retrieval of information from external sources, such as Reuters. Some systems also include DSS like capabilities that let executives test ‘what-if’ strategies and compare alternatives. Often companies combine DSS, GDSS, AND ESS.
ESS software includes powerful processing capabilities. These capabilities are necessary to boil down large volumes of performance details to a few screens that will allow the executives to grasp the status of events and assess key business indicators quickly. The summaries are usually presented in a standard format and rely heavily on business graphics to display results and relationships between business variables.

33. The Executive Support System (ESS)
Require a greater proportion of information from outside the business
Competitors, government, trade associations, consultants, etc.
Behind the scenes the ESS software retrieves data and information from a variety of internal and external databases. An executive may want to know the current stock prices of the company, the orders booked, the price of certain important material. An airline executive might want to know the cost of fuel, an executive at an appliance manufacturer may want to knw the current steel prices, etc.
Are linked with value added business processes

34. ESS Support: defining an overall vision strategic planning
strategic organising and staffing
strategic control
crisis management
One of the key roles of senior executives is to provide a broad vision for the entire organisation. This vision includes the organisation’s major products and services, the types of businesses it supports today and in the future, and its overriding goals.
Strategic planning involves determining long-term objectives by analysing the strengths and weaknesses of the firm, predicting future trends, and projecting the development of new products. It also includes planning the acquisition of new equipment, analysing new merger possibilities, making decisions concerning downsizing and the sale of assets.
Top-level executives are concerned about the organisation structure, e.g. decisions concerning the creation of new departments or downsizing the labour force. Should the marketing department be divided along the company’s 2 major products? Should the IS department be placed under new leadership? These questions can have a profound effect on the overall effectiveness of the organisation and should be supported by an ESS. ESS can be used to help analyse the impact of staffing decisions, potential pay rises, changes in employee benefits, and new work rules.
Strategic control- monitoring and managing the overall operation of the organisation.
Handling emergencies. In many cases strategic emergency plans can be put into place with the help of an ESS.

35. Expert Systems Knowledge Based Information System (KBIS)
Expert System (ES):
A KBIS that uses its knowledge about a specific area to act as an expert consultant to the end user

36. User Interface Programs
Expert System
IF… and IF … and IF … and IF … THEN
QUERY
EXPERT ADVICE
Inference Engine
INPUT
OUTPUT
User Interface Programs
Expert System Software
USER
Knowledge Base
Fact… Fact… Realtionship … Fact … Realtionship … Realtionship …

37. Knowledge Acquisition programme
Expert System Development
Knowledge Engineering
THE EXPERT and/or THE KNOWLEDGE ENGINEER
Knowledge Acquisition programme
Components of an Expert System, and the components involved in building the knowledge base. (Adapted from O’Brien (2004:293) and Oz(2006:333))

38. Whale Watcher http://www.aiinc.ca/demos/whale.html

39. Expert Systems Applications in Business
Chapter 11, Minicase 2, Page of Turban etal.
Pages , Laudon and Laudon
See O’Brien ff488
- Case Studies

40. Expert Systems Applications in Business
CLUES (Countrywide’s Loan Underwriting Expert Systems)
Intelligent help desk IBM, Microsoft, Compaq
CADS (Consumer Appliance Diagnostic System) - Whirlpool
See Laudon & Laudon, 6th edition

41. Web-based Expert Systems
Disseminating knowledge and expertise
Transferring ESs over the Net to human users and other computerised systems
Also supports the spread of multimedia-based ES (intellimedia systems)

42. Executive support systems (ESS)
Laudon & Laudon, p47
Executive support systems (ESS)
Management Information systems (MIS)
Decision support systems (DSS)
Knowledge systems (ES and office systems)
Transaction processing systems (TPS)

43. The major application areas of AI (O’Brien, 2002:223)
Artificial Intelligence
Cognitive Science Applications
Robotics Applications
Natural Interface Applications
Expert systems Learning systems Fuzzy Logic Genetic Algorithms Neural Networks Intelligent Agents
Visual perception Tactility Dexterity Locomotion Navigation
Natural languages Speech recognition Multisensory interfaces Virtual reality
The major application areas of AI (O’Brien, 2002:223)

44. Intelligent Support Systems
Systems that augment a manager’s intelligence and expertise
Expert Systems (ES)
Artificial intelligence
Natural Language processing
Neural networks
Fuzzy Logic
Intelligent agents