how businesses use information systems

8/3/2019 How Businesses Use Information Systems

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Learning objectives

Define and describe business processes and their

relationship to information systems. Evaluate the role played by systems serving the various

levels of management in a business and their relationship toeach other.

Explain how enterprise applications, collaboration andcommunication systems, and intranets improveorganizational performance.

Assess the role of the information systems function in abusiness.


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Learning objectives

Define and describe business processes and their

relationship to information systems. Evaluate the role played by systems serving the various

levels of management in a business and their relationship toeach other.

Explain how enterprise applications, collaboration andcommunication systems, and intranets improveorganizational performance.

Assess the role of the information systems function in abusiness.


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Learning objectives (more...)

Demonstrate how Porters competitive forcesmodel helps companies develop competitivestrategies using Information Systems.


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Business Processes


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Business Processes andInformation Systems

Business processes:- Workflows of material, information, knowledge

- Sets of activities, steps- May be tied to functional area or be cross-functional

Businesses: Can be seen as collection of business processes- Business processes may be assets or liabilities


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Examples of functional businessprocesses

Manufacturing and productiono Assembling the product

Sales and marketing

o Identifying customers Finance and accounting

o Creating financial statements Human resources

o Hiring employees


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The Order Fulfilment Process

Fulfilling a customer order involves a complex set of steps that requires theclose coordination of the sales, accounting, and manufacturing functions.


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Business Processes andInformation Systems

Information technology enhances business processes in twomain ways:

Increasing efficiency of existing processes- Automating steps that were manual

Enabling entirely new processes that are capable of

transforming the businesses- Change flow of information- Replace sequential steps with parallel steps

- Eliminate delays in decision making


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Classes of Information Systems(and the target audience)


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Classes of Information Systems

Transaction processing systems (TPS) Perform and record daily routine transactions necessary to

conduct businesso Examples: sales order entry, payroll, shipping

Allow managers to monitor status of operations and relationswith external environment

Serve operational levels Serve predefined, structured goals and decision making


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A Payroll TPS

A TPS for payroll processing captures employee payment transaction data (such as a timecard). System outputs include online and hard-copy reports for management and employeepaychecks.


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AN LSBF TPS

Swipe card system is a TPS system

Characteristicso Rapid Responseo Reliabilityo

Inflexibility

o Controlled ProcessingWHY?


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Management Information Systems (MIS)

Serve middle management Provide reports on firms current performance, based on data

from TPS Provide answers to routine questions with predefined procedure

for answering them Typically have little analytic capability


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AN LSBF MIS

Student Attendance Reporting Tool isan MIS Characteristics

o Integrationo

Centralized

o Software systemo Flexible reporting

WHY?


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How Management Information Systems

obtain their Data from the OrganisationsTPS

In the system illustrated by this diagram, three TPS supply summarized transaction data to theMIS reporting system at the end of the time period. Managers gain access to the organizationaldata through the MIS, which provides them with the appropriate reports.


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Decision Support Systems (DSS) Serve middle management (and questions from executive!) Support non-routine (PREDICTIVE!) decision making

o Example: What is impact on production schedule if Decembersales doubled?

Often use external information as well from TPS and MIS Model driven DSS

o Voyage-estimating systems Data driven DSS

o Intrawests marketing analysis systems


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AN LSBF DSS

DSS is a complicated system

Characteristicso Large Amounts of Datao Many data sources (Internal + External)o Requires knowledgeable usero Very Flexible + Predictive

WHY?


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Executive Support Systems (ESS) Support senior management Address non-routine decisions requiring judgment, evaluation, and

insight Incorporate data about external events (e.g. new tax laws or

competitors) as well as summarized information from internal MISand DSS

Example: ESS that provides minute-to-minute view of firmsfinancial performance as measured by working capital, accounts

receivable, accounts payable, cash flow, and inventory


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Example of an Executive Support System

This system pools data from diverse internal and external sources and makes themavailable to executives in easy-to-use form.


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A Brief Look at some popularEnterprise Systems

Specifically: ERP, CRM, SCM, KM


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Enterprise Systems Span functional areas Execute business processes across firm Include all levels of management Four major applications:

- Enterprise Resource Planning systems- Supply chain management systems- Customer relationship management systems- Knowledge management systems


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Enterprise Systems

Enterprise applications Automate processes Span multiple business functions Span organizational levels Often extend outside the organization.


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Example: Enterprise Resource Planning(ERP)

Enterprise Resource Planning (ERP) Collects data from different firm functions and stores data in single

central data repository Resolves problem of fragmented, redundant data sets and

systems Enable:

o Coordination of daily activitieso Efficient response to customer orders (production, inventory)o Provide valuable information for improving management

decision making


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Example: Supply Chain ManagementSystems (SCM)

Manage firms relationships with suppliers Share information about:

o Orders, production, inventory levels, delivery of products andservices

Goal: Right amount of products to destination with least amount oftime and lowest cost


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Example of a Supply Chain ManagementSystem

Customer orders, shipping notifications, optimized shipping plans, and other supply chaininformation flow among Haworths Warehouse Management System (WMS), TransportationManagement System (TMS), and its back-end corporate systems


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Example: Customer RelationshipManagement Systems (CRM)

Provide information to coordinate all of the business processesthat deal with customers in sales, marketing, and service tooptimize revenue, customer satisfaction, and customer retention

Integrate firms customer-related processes and consolidatecustomer information from multiple communication channels


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Salesforce.com CRM ESS

Illustrated here are some of the capabilities of Salesforce.com, a market-leading provider of on-demandcustomer relationship management (CRM) software. CRM systems integrate information from sales,marketing, and customer service.


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Example: Knowledge Management Systems(KMS)

Support processes for acquiring, creating, storing, distributing,applying, integrating knowledge

Collect internal knowledge and link to external knowledge Include enterprise-wide systems for:

- Managing documents, graphics and other digital knowledgeobjects- Directories of employees with expertise


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The structure of the IT Department inthe Organization


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Department: The Information SystemsFunction in Business

Information systems department:- Formal organizational unit responsible for informationtechnology services- Includes programmers, systems analysts, project leaders,information systems managers- Often headed by chief information officer (CIO), alsoincludes chief security officer (CSO) and chief knowledgeofficer (CKO)

End-users:- Representatives of other departments, for whom

applications are developed


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Organising Information Systems Function Small firm may not have formal information systems group Larger companies typically have separate department which may be

organized along one of several different lines: Decentralised (within each functional area) Separate department under central control Each division has separate group but all under central control


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Organising Information Systems FunctionSeparate department under central control

B: A separate department under central control

Reports To

WHY? Economies of Scale Overlap of IS Centralized IS spans

departments Skill crisis

Risks IT department

doesnt listen to

anyone Technology Driven


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Organising Information Systems FunctionDecentralised

WHY? More Agile The needs of the

departments are so

different.Often a sign ofimmature IT in anorganization.


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Organising Information Systems FunctionLarge multidivisional company but under

centralised control

C: Represented in each division of a large multidivisional company but under centralised control

Different parts of theIT department areassigned to differentfunctional groups, butmanaged by IT

hierarchy ofmanagers.

WHY?The needs of thedepartments are sodifferent.This appears to beintelligent choice forthis organization.


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Using IT to give the FIRM anadvantage in the INDUSTRY.


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Using Information Systems to achieve

Competitive Advantage How can we make our organization more competitive?o Understand the Industry!

Michael Porters competitive forces modelo Five competitive forces shape fate of firm in the industry

The bargaining power of suppliers The threat of the entry of new competitors The intensity of competitive rivalry The threat of substitute products or services The bargaining power of customers (buyers)


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Example: Supplier Bargaining Power

How can we reduce Supplier Bargaining Power? Increase the number of suppliers (Reverse Auctions) Understand supplier so you have a bargaining advantage

o (understand the margins of the suppliers)


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Example: Customer Bargaining Power

How can we understand / affect Customer Bargaining Power? Understand the price sensitivity (use DSS system) Understand features that the customer values, differentiate (CRM system) Lower the price for the customer (SCM system) Lock the customer in (Build Apple style ecosystem)


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Example: Competitive Rivalry

How can we understand / affect Competitive Rivalry? Innovate using Information Systems Understand how other firms will react to our actions based on historical data Put pressure on other firms by lowering our costs (better SCM for example)

More information


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More information ...

Greasly, A. (2004) Simulation Modelling for Business,

Hants, Ashgate Publishing Marchand, D.A., Davenport, T.H.(2000) Mastering

Information Management, Harlow, Financial Times/PrenticeHall

Marchand, D.A., Kettinger, W.J. (2002) InformationOrientation, New York, oxford University Press

Porter, M. (2004) Competitive Strategy, New York, Free

Press

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