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Processes, Organizations, and Information Systems
Chapter 7
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“How Much Money Does a System Own?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Who are the target customers and how to induce them to buy?• Doctors?
– Care about medicine and operations, some care about costs– Not focused on exercise.
• Insurance companies? – Exercise doesn’t prevent disease.– When people get in good shape, they live longer, and their long-
term health care expenses increase.
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7-3
Who Will Pay?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Health clubs.• Employers.• Selling ad space to health clubs and manufacturers.• Social media–driven.• Can PRIDE support 10,000 people spinning at the same time?• Who to monetize PRIDE?
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Study Questions
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Q1: What are the basic types of processes?Q2: How can information systems improve process quality?Q3: How do information systems eliminate problems of information silos?Q4: How do CRM, ERP, and EAI support enterprise processes?Q5: What are the elements of an ERP system?Q6: What are the challenges of implementing and upgrading enterprise
information systems?Q7: How do inter-enterprise IS solve the problems of enterprise silos?Q8: 2026?
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7-5
Q1: What Are the Basic Types of Processes?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Business Process with Three Activities
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How Do Structured Processes Differ from Dynamic Processes?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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7-7
How Do Processes Vary by Organizational Scope?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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7-8
Characteristics of Information Systems
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Q2: How Can Information Systems Improve Process Quality?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Process efficiency– Ratio of outputs to inputs.
• Process effectiveness– How well a process achieves organizational strategy.
• How can processes be improved?– Change process structure.– Change process resources.– Change both.
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How Can Information Systems Improve Process Quality?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Performing an activity.– Partially automated, completely automated.
• Augmenting human performing activity.– Ex: Common reservation system.
• Controlling data quality.– Ensure data complete and correct before continuing process
activities.
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Q3: How Do Enterprise Systems Eliminate the Problem of Information Silos?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• What are the problems of information silos?– Data duplicated.– Data inconsistency.– Data isolated.– Disjointed processes.– Lack of integrated enterprise information.– Inefficiency: decisions made in isolation.– Increased cost for organization.
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Problems Created by Information Silos
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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How Do Organizations Solve the Problems of Information Silos?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Integrate into single database.
• Revise applications.
• Allow isolation, manage to avoid problems.
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An Enterprise System for Patient Discharge
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Q4: How Do CRM, ERP, and EAI Support Enterprise Processes?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Business Process Reengineering (BPR)– Integrated data, enterprise systems create stronger, faster,
more effective linkages in value chains. – Difficult, slow, exceedingly expensive.– Key personnel determine how best to use new technology.– Requires high-level and expensive skills and considerable
time.
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Emergence of Enterprise Application Solutions
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Inherent processes – Predesigned processes for using application.– “Industry best practices”.
• Customer relationship management (CRM).• Enterprise resource planning (ERP).• Enterprise application integration (EAI).
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Customer Relationship Management (CRM)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Suite of applications, database, set of inherent processes.• Manage all interactions with customer through four phases of
customer life cycle.– Marketing, customer acquisition, relationship management,
loss/churn.• Supports customer-centric organization.
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Customer Life Cycle
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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CRM Applications
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
CRM functionality varies
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ERP Applications
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Primary purpose is integration
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Pre-ERP Information System: Bicycle Manufacturer
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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ERP Information Systems
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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ERP Enabled Sales Dashboard
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Enterprise Application Integration (EAI)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Connects system “islands.”• Enables communicating and sharing data.• Provides integrated information.• Provides integrated layer on top of existing systems while
leaving functional applications “as is.”• Enables gradual move to ERP.
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Design and Implementation for the Five Components
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Virtual Integrated Database
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So What? Who Fixes a Workflow Problem?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Computer programmer? No.• Network engineer? No.• Database administrator? No.• Someone with knowledge of business. Yes!
– If workflow involves information system, someone knowledgeable and comfortable working with technical people.
– You with help of a business analyst.
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Ethics Guide: Dialing for Dollars
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Assume you are a salesperson.• Bad quarter. VP of Sales authorized a 20% discount on new
orders if customers take delivery prior to end of quarter so order can be booked for this quarter.
• VP says “Start dialing for dollars, and get what you can. Be creative.”
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Unethical, Violate SEC Rules, or Fraudulent
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
1. Side letter2. Delayed discount3. Fictitious account
• Send email with return product agreement.• Offer product at full price, but agree to give 20% credit next
quarter.• Sell to fictitious company and ship product to your brother-in-
law’s garage.
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Q5: What Are the Elements of an ERP System?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Hardware• ERP Application programs• ERP Databases• Business process procedures• Training and Consulting
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True ERP Have Application that Integrate: (http://www.erpsoftware360.com/erp-101.htm)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Supply chain • Manufacturing • CRM • Human resources • Accounting
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ERP Solution Components
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• ERP Application Programs– Configurable vendor applications.
• ERP Databases– Trigger Computer program within database to keep database
consistent when certain conditions arise.• Stored Procedure
Enforces business rules.
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ERP Solution Components (Cont’d)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Business Processes and Procedures– Adapt to inherent processes and procedures, or design new ones?
• Training & Consulting– Training to implement.– Top management support, preparing for change, dealing with
resistance.– Training to use.
• Industry-Specific Solutions
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Example of SAP Ordering Business Process Blueprint
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Example of SAP Ordering Business Process Blueprint (cont’d)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Characteristics of Top ERP Vendors
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Q6: What Are the Challenges of Implementing and Upgrading Enterprise Information Systems?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Q7: How Do Inter-enterprise IS Solve the Problems of Enterprise Silos?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Inter-enterprise PRIDE System
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Q8: 2026?
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• ERP vendors and customers resolved problems of cloud-based ERP.• Hybrid model
– ERP customers store most of their data on cloud servers managed by cloud vendors and store sensitive data on their own servers.
• Gov’t, accounting, financial standards for monitoring organizations for appropriate compliance.
• Delicate balance between risk of loss and improvement to processes.• Machines able to employ ERP system to schedule own maintenance.
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Security Guide: One-Stop Shopping
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• IS design involves constant trade-offs. – Risk of loss higher, security focused.– Inter-enterprise system can connect competitors with
different incentives and agendas.– How secure is the cloud vendor?– BitcoinCentrally located, accessible from anywhere, very large
sum of electronic money.
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Using the Guide: ERP and the Standard, Standard Blueprint
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Organization adapts processes to standard blueprints.• If all firms in an industry use same business processes, how
can a firm gain competitive advantage?• How will innovation occur?• Does “commoditized” standard blueprint prevent sustaining a
competitive advantage?
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Active Review
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
Q1: What are the basic types of processes?Q2: How can information systems improve process quality?Q3: How do information systems eliminate the problems of information silos?Q4: How do CRM, ERP, and EAI support enterprise processes?Q5: What are the elements of an ERP system?Q6: What are the challenges of implementing and upgrading enterprise
information systems?Q7: How do inter-enterprise IS solve the problems of enterprise silos?Q8: 2026?
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Case Study 7: A Tale of Two Inter-organizational IS
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Access CT – Enrolled 208,301 and model for state-run exchanges.
• Cover Oregon– Spent $250 million for system clearly inoperable– Exchange’s board of directors decided to stop development
and utilize the federal exchange.
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Healthcare ExchangeInterorganizational IS
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
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Access CT
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Exchange went live in only 12 months.• Counihan
– More than 30 years of experience working in insurance industry,
– Key player in development of Massachusetts healthcare system.
• Hired senior staff with deep experience in insurance.
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Access CT (cont'd)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Wadleigh director of application development for CIGNA, a health services organization.
• Primary assignment• Hire and manage an outside contractor to develop exchange
website and supporting backend code, and manage implementation of exchange information system.
• Created project plan and began search for contractor to develop the site.
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Cover Oregon
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Did not hire a supervising contractor for project, instead took an active role in software’s development.
• Agency suffered high employee turnover, and had difficulty hiring and keeping qualified personnel.
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Cover Oregon (cont'd)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• OHA hired software development company to create major software components. – Two of three finalists dropped out at last minute, leaving Oracle
Corporation a sole source vendor. – Oracle negotiated time and materials contracts instead of contract
for specific deliverables at specific prices. – When problems developed, Oracle was paid tens of millions of
additional money for change orders on same time and materials basis.
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Cover Oregon (cont'd)
C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .
• Oregon legislature required state to hire a quality assurance contractor, Maximus Corporation, to oversee project.
• Maximus reported significant problems involving divided control, lack of clear requirements, inappropriate contracting methodology, lack of project planning, and lack of progress.
• Unclear who got those reports or what was done with them.• Head of OHA project threatened to withhold Maximus’ payment.
• End result: Exchange development failed.
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C o p y r i g h t © 2 0 1 7 P e a r s o n E d u c a t i o n , I n c .