Processes, Organizations, and Information Systems

Chapter 7

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“How Much Money Does a System Own?

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• 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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Who Will Pay?

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• 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

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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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Q1: What Are the Basic Types of Processes?

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Business Process with Three Activities

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How Do Structured Processes Differ from Dynamic Processes?

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How Do Processes Vary by Organizational Scope?

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Characteristics of Information Systems

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Q2: How Can Information Systems Improve Process Quality?

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• 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?

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• 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?

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• 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

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How Do Organizations Solve the Problems of Information Silos?

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• Integrate into single database.

• Revise applications.

• Allow isolation, manage to avoid problems.

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An Enterprise System for Patient Discharge

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Q4: How Do CRM, ERP, and EAI Support Enterprise Processes?

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• 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

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• 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)

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• 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

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CRM Applications

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CRM functionality varies

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ERP Applications

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Primary purpose is integration

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Pre-ERP Information System: Bicycle Manufacturer

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ERP Information Systems

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ERP Enabled Sales Dashboard

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Enterprise Application Integration (EAI)

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• 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

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Virtual Integrated Database

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So What? Who Fixes a Workflow Problem?

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• 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

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• 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

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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?

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• 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)

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• Supply chain • Manufacturing • CRM • Human resources • Accounting

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ERP Solution Components

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• 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)

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• 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

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Example of SAP Ordering Business Process Blueprint (cont’d)

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Characteristics of Top ERP Vendors

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Q6: What Are the Challenges of Implementing and Upgrading Enterprise Information Systems?

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Q7: How Do Inter-enterprise IS Solve the Problems of Enterprise Silos?

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Inter-enterprise PRIDE System

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Q8: 2026?

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• 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

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• 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

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• 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

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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?

7-43

Case Study 7: A Tale of Two Inter-organizational IS

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• 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

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Access CT

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• 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)

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• 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

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• 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)

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• 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)

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• 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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