Processes, Organizations, and Information Systems Chapter 7 Processes, Organizations, and Information Systems This chapter explores structured processes and information systems within an organization. It extends discussions of business process (Chapter 3) to investigate three types of processes and scope of information systems they use.

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall "Every Morning I Get a Report About the Exercise Your Mother's Getting..." GOALS Provide a setting for students “to assess, evaluate, and apply emerging information technology to business.” Connect applications of IS to the fundamentals presented in Chapters 1–6. Show a realistic application of mobile + cloud technology. Demonstrate the need for, creation of, and some of the issues involving an inter-organizational IS. A cardiac surgeon, Dr. Romero Flores, is developing a prototype of health care and patient portion of the PRIDE system. He focused on a prototype to learn whether patients will achieve expected benefits. Once they have answers to those questions, they will determine how to proceed to an operational system that involves other organizations shown in this figure. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Study Questions Q1: What are the basic types of processes? Q2: How can information systems improve process quality? Q3: How do information systems eliminate the problem 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 new enterprise information systems? Q7: How do inter-enterprise IS solve the problems of enterprise silos? Q8: 2023? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Q1: What Are the Basic Types of Processes? Business Process with Three Activities This is a simplified view of a three-activity process for approving customer orders. Each activity is a sub-process, e.g., check for inventory, check customer credit, send order data to Customer and to Order Fulfillment Process. Customers can check status of their order while it is being processed. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

How Do Processes Vary by Organizational Scope? Structured processes: Formally defined, standardized processes involve day-to-day operations: accepting a return, placing an order, purchasing raw materials, and so forth. Dynamic processes: Flexible, informal and adaptive processes often involve collaborative decisions and activities. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Common Workgroup Processes Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

How Do Structured Processes Vary by Scope? Characteristics of departmental information systems are summarized in top row. Often, procedures are formalized in documentation, and users frequently receive formal training in use of those procedures. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Q2: How Can Information Systems Improve Process Quality? Process efficiency: Ratio of process 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 Processes are means people use to organize an activity to achieve organization’s goals. Two dimensions of process quality are efficiency and effectiveness. Process efficiency – a measure of the ratio of process outputs to inputs Process effectiveness – a measure of how well a process achieves organizational strategy Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Information Systems Can Be Used to Improve Process Quality By: Performing an activity Partially automated, completely automated Augmenting human performing activity Common reservation system Controlling process flow Order approval process Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Q3: How Do Enterprise Systems Eliminate the Problem of Information Silos? How Do Information System Silos Arise? Data isolated in islands of automation Different department goals Different personal and workgroup needs Duplicate data as organization grows An information silo exists when data are isolated in separated information systems. Information system silos arise when: IS supports departmental processes rather than enterprise-level processes. Personal and workgroup support applications are created over time. Organizations grow, especially by merger and acquisitions. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Problems Created by Information Silos This table summarizes problems of information silos. Duplicated and inconsistent data Separated supporting applications; difficult for two activities to reconcile their data, getting approvals will be slow and possibly erroneous Lack of integrated enterprise data as a consequence of disjointed systems Inefficiency results from making decisions in isolation Information silos increase costs — duplicated data, disjointed systems, limited information, and inefficiencies all mean higher costs Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Information Silos as Drivers Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Example Enterprise Process and Information System Hospital uses an enterprise-wide information system to support this process. IS provides data entry forms, reports, and notifications to human actors in this process. It also controls the flow of process activity as shown by dotted red arrow. To use new system, staff needs to transition from a paper-based system to computer-based one. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Ethics Guide: Dialing for Dollars Assume you are a salesperson. Been a 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.” You identify your top customers to offer discount deal. Goals Understand how business pressures motivate people to act unethically and sometimes illegally. Discuss ethical principles among three different aggressive sales techniques. Illustrate how deception in the use of an interdepartmental information system may cause unintended consequences. Software industry has used all three techniques in this guide, especially during the 1990s and early 2000s. These techniques, when applied to distributor customers, are often referred to as “stuffing the channel.” It’s a risky strategy because the company is pushing this quarter’s problem into next quarter. Unless there is a substantial increase in sales demand, problem will grow worse. Managers do it to delay stock price slaughter for at least one quarter. The techniques presented are all unethical. First and third violate SEC rules and regulations, while second is criminally fraudulent. 1. Side letter 2. Delayed discount 3. Fictitious account Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Q4: How Do CRM, ERP, and EAI Support Enterprise Processes? Business Process Reengineering Integrated data, enterprise systems create stronger, faster, more effective linkages in value chains Difficult, slow, and exceedingly expensive Key personnel determine how best to use new technology Requires high-level and expensive skills and considerable time Hospital needed to determine how best to change its processes to take advantage of new capability. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Emergence of Enterprise Application Solutions Inherent processes Predesigned procedures for using software products Based on “industry best practices” Customer relationship management (CRM) Enterprise resource planning (ERP) Enterprise application integration (EAI) Organizations can license software and obtain prebuilt procedures. Over time, three categories of enterprise applications emerged: customer relationship management, enterprise resource planning and enterprise application integration. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Customer Relationship Management (CRM) Suite of applications, a database, and a set of inherent processes Manage all interactions with customer through four phases of customer life cycle: Marketing, customer acquisition, relationship management, loss/churn Intended to support customer-centric organization CRM is a suite of applications, a database, and a set of inherent processes for managing all interactions with a customer from lead generation to customer service. Every contact and transaction with customer is recorded in CRM database. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Customer Life Cycle Marketing sends messages to target market to attract customer prospects. When prospects order, they become customers who need to be supported. Additionally, relationship management processes increase the value of existing customers by selling them more products. Over time, organization loses some customers. When this occurs, win-back processes categorize customers according to their value and attempt to win back and turn them into high-value customers. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall CRM Applications CRM components exist for each stage of the customer life cycle. As shown, all applications process a common customer database. This design eliminates duplicated customer data and removes the possibility of inconsistent data. It also means that each department knows what has been happening with the customer at other departments. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall ERP Applications ERP is a suite of applications (modules), a database and a set of inherent processes for consolidating business operations into a single, consistent, computing platform. ERP systems are an IS based on ERP technology. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Pre-ERP Information System: Bicycle Manufacturer This diagram represents processes used by a bicycle manufacturer. There are five non-integrated databases. Assume company has a separate accounting system (not shown) that is not integrated. With such a pre-ERP system, financial statements are always outdated and weeks late. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

ERP Information Systems All activity processed by ERP applications and consolidated data are stored in a centralized ERP database. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

ERP Enabled Sales Dashboard With integration, ERP systems can display current status of critical business factors to managers and executives. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Enterprise Application Integration (EAI) Connects system “islands.” Enables communicating and sharing data. Provides integrated information. Provides integrated layer over the top of existing systems while leaving functional applications “as is.” Enables a gradual move to ERP. EAI is a suite of software applications that integrates existing systems by providing layers of software that connect applications. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Design and Implementation for the Five Components “Virtual Integrated Database” EAI enables organizations to use existing silo applications while eliminating many serious problems of isolated systems. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Using MIS InClass 7: Improving the Process of Making Paper Airplanes Purpose of this exercise is to demonstrate process concepts. Create one or more groups with four students in a group. Each student will perform one work center (WC) activity. Assembly line processes transform raw material (a stack of plain paper) into folded paper airplanes as finished goods. See Figure 7-15 (p. 231) for details for the work center tasks. See textbook for exercise instructions. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Q5: What Are the Elements of an ERP System? Applications programs, databases, procedures, training and consulting that integrate: Supply chain Manufacturing CRM Human Accounting To be considered a true ERP, it must include applications that integrate the listed functions. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

ERP Application Programs Set configuration parameters ERP databases Initial database design included Trigger program code Stored procedure code ERP process blueprints ERP consulting and training An ERP solution consists of application programs, databases, business process procedures, training and consulting. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

SAP Ordering Business Process ERP vendors provide starter kits called industry-specific solutions. These solutions contain program and database configuration files, and process blueprints that apply to ERP implementations in specific industries. SAP and other ERP vendors created dozens of starter kits for manufacturing, sales and distribution, health care, and other major industries. Diagram continued on next slide. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Inherent Processes: SAP Ordering Business Process (cont’d) This is the bottom part of the process diagram starting with “Goods received procedure with PO reference for stock material.” Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What Companies Are the Major ERP Vendors? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Q6: What Are the Challenges of Implementing New Enterprise Information Systems? With no single department manager in charge, implementation is a collaborative effort with committees and steering groups. Organization must identify gaps and decide what to do with them. It must change from using isolated departmental systems to using new enterprise system, while continuing to run the business. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Q7: How Do Inter-enterprise IS Solve the Problems of Enterprise Silos? Information silos that exist among health care providers, health clubs, and PRIDE users. Information Silos Without PRIDE Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Inter-enterprise PRIDE System Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Q8: 2023? Expect many acquisitions by the major players such as Oracle and SAP. Storing of data in various places in the cloud, while other versions of data stored in corporate data in SAP can cause data update and integrity problems. Allowing access via mobile devices is potentially serious security threat. Companies want to move to lower costs of the cloud, but cannot plunge into new cloud-based solutions without causing considerable organizational turmoil, if not failure. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall One-Stop Shopping Data integration can make organizations more vulnerable to fraudsters. Centralizing data enables organization to focus security measures. Sharing data has privacy and security issues for PRIDE. Example underlines some of management problems of inter-enterprise IS. Viewing competitor’s? How secure is the cloud vendor? GOALS Understand potential security problems of integrating data into a single database, whether in enterprise or inter-enterprise systems. Realize security and privacy issues when inter-organizational systems integrate competitors (as PRIDE must do to accomplish its purpose). Underline some of the management challenges inherent in inter-enterprise systems. Introduce caution about cloud security. Remind students of need for using strong passwords. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Guide: ERP and the Standard, Standard Blueprints Organization adapts its 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? GOALS Reinforce importance of inherent processes in ERP, and other licensed software, and expense and challenges of variances from those processes. Introduce possible longer-range consequences of adapting to vendors’ inherent processes. Demonstrate an example of long-range thinking. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Active Review Q1: What are the basic types of processes? Q2: How can information systems improve process quality? Q3: How do information systems eliminate the problem 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 new enterprise information systems? Q7: How do inter-enterprise IS solve the problems of enterprise silos? Q8: 2023? Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Case Study 7: Using the PRIDE Database Goal Students to create a process diagram similar to Figure 7-27 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Defining the Workout Table with SQL Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

PRIDE, Person, Workout, and Performance Tables Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Tables Relating to Exercise Prescriptions Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall PRIDE Database Tables Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall